Did you know that 82 percent of small businesses that fail find that problems with operating cash flow were the primary reason for their failure? While having a strong plan for your business is important for your success, it will be difficult to get to where you picture your business going if you don’t know how to manage cash flow in an efficient way.
Having a strong grasp of cash flow management is what allows small businesses and their owners to weather the storm when it comes to tough stretches for the economy. If you’re wanting to improve cash flow for your small business then today is your lucky day.
You’ve come to the perfect place to learn some cash flow tips that will show you how to make the most of your cash flow. Keep reading this article for seven helpful tips.
1. Find and Understand Your Breakeven Point
Finding your breakeven point is important for any business of any size, but it is especially important when you’re operating a new small business. Your breakeven point is the minimum amount of sales that you’ll need to make in order to break even from a financial standpoint.
These sales will give you the cash flow to pay off any expenses that your business faces but there won’t be anything left over for you to invest into growing your company. Knowing your breakeven point is a huge step in the right direction when you’re looking to improve cash flow for your operations.
It is also a useful piece of information for you to know when it comes to monitoring if your sales are passing up where your expenses are. You’ll have an easier time setting goals for you and your employees.
2. Receive All of Your Receivables
It is no secret that businesses have a difficult time getting their money when it comes to accepting payment through credit. This makes it much more difficult to improve cash flow at your business but there are things that you can do to help. You should make sure that you invoice your customers in a quick and efficient manner.
You also need to be diligent when it comes to getting the receivables that your business is owed. This means the unenviable task of following up on any and all past-due invoices that your business needs payment on. If you’re having trouble with this then you need to consider requiring deposits.
This is a proven way of getting payments from new customers. You can inform them of what is invoice finance. It is a good idea to delegate someone in your business to monitor accounts receivables at all times. This is a huge way to improve cash flow for your business.
3. Manage Your Payables
You need to have a strong strategy when it comes to how you’ll manage your payables. It is no secret that expenses grow like weeds and sales can be hard to come by sometimes. It is a wise move to hold onto your cash for as long as you can when your business is getting started as a way to manage cash flow.
One great way to do this is to pay your invoices on the date that they’re due rather than paying them early. If you’ve built a strong relationship with your suppliers then you can also ask if they’re willing to push the accounts payable date back to 45 days. This will give you more time to make the most of your cash.
4. Use Early Payment Discounts
Some suppliers that you work with might offer you a discount if you choose to pay early for the things you purchase. If this is an option then you need to jump on it and start making it work for you. Even discounts that might seem insignificant will amount to better cash flow over a long period of time.
One thing you’ll want to do is compare the costs and benefits of paying early for the discount versus having more cash on hand for growing your business.
5. Tighten Your Credit Terms
You should also look at ways that you can tighten your credit terms. This could be in the form of raising the deposit requirement from customers by a few percentage points or it could mean asking to receive payment for your goods in 28 days rather than 30. These changes are so insignificant to customers that they likely won’t bat an eye.
It is little cash flow tips like this one that makes a huge difference when it comes to the money you have to reinvest into growing your business.
6. Develop Insight
You’ll want to make sure that you’re monitoring the status of your cash flow at least one time each month. This will help you monitor whether you’re staying on the right course or not. Doing this will help you to monitor and analyze your revenues and sales as well as your expenses on a monthly basis.
7. Get Rid of Old Equipment
If you look around your office odds are that you’ll find older equipment and technology that doesn’t get used anymore. Not only does this take up valuable space in your office, but it is a wasted asset in the sense that you could get some cash flow for this stuff.
You might not get a king’s ransom for these items, but it is still a great way to boost your cash flow and give your company more money to work with. Little things like that go a long way when you’re starting a small business and getting it off of the ground.
Grow Your Operating Cash Flow Today
Growing your operating cash flow is vital to the long-term health of your business and operations. Make sure that you’re diligent about your accounts receivables and getting the money that you’re owed on a timely basis. You should also look at doing little things like accepting early payment discounts from suppliers and tightening up your own credit terms.
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