Cash flow problems are common in small businesses. You don’t have billions in the bank like the big boys, and the banks aren’t generous with even the smallest loans. It might seem like you’re drowning in debt with worse cash flow problems on the horizon…Don’t worry. Soon you’ll know how to improve cashflow without taking on more debt.
Have clear business terms
Clear business terms should be set before you work with other businesses. Make sure they understand the standard expected from them, for example, deliveries should be on time, products should be as advertised, etc. This means you won’t have any last minute shortfalls you couldn’t predict with cashflow forecasting. If they violate business terms, start looking for their replacement. You can’t go bust because other companies don’t take their business seriously.
Pay bills on time
“Yeah, obviously!” you say. “I don’t want late payment fees.” No. Paying your bills on time means you don’t pay them late or early because there’s no benefit of doing so. The loan company and banks don’t reward people who pay early. They charge you the same interest as usual. The better option is to keep the money until it’s due. Then you’ve got a positive cashflow statement as long as possible, which comes in handy in emergencies.
Get paid on time
If you don’t pay creditors on time, the reminders start. The banks and loan companies don’t mess around when it comes to money, even though they can afford to wait. You shouldn’t be lenient either. Submit invoices on time and clearly define the due date. The day after the due date, send your first reminder. If they ignore your messages, cease any services you provide. If they continue to ignore you, send a court letter. Be prepared to follow-through.
Use invoice factoring
Invoice factoring involves selling your invoices to a third party. This means you get paid for the job and won’t have to worry about chasing money owed. The company provides up to 90% of the invoice balance to you and goes after the client until the money is repaid. Obviously this sounds better than spending time managing different invoices while going into your overdraft. Not everyone qualifies for invoice factoring, so you’ll have to read the terms and conditions for each company you consider.
Do daily cashflow forecasting
Cashflow forecasting involves looking over your finances to plan for future cash requirements. Logging into your accounts system on a daily basis might seem tedious, but it pays off. Those little expenses add up over time, but you shouldn’t find out over time. You need to know now. Adjusting your cashflow forecasting on a daily basis means you’ll see early on where you’re wasting money, where you could save, and what outgoings might be a cash flow problem long-term.
Now you know how to improve cashflow without taking on even more debt. Loans and grants are useful injections of cash, but you’ve got to pay those back. These tips mean you can help yourself while staying out of even more money trouble. It won’t happen overnight, but following this advice means you can look forward to a brighter cashflow forecast in the near future.
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