If you are a business owner, then you already know how important cash flow is. Good cash flow allows you to run and grow your business successfully, and it also helps attract investors. The key to improving your cash flow isn’t just bringing in more cash, but also limiting your cash outflow. You must find a balance between your sales and expenses, and here are four practical tips you can employ today to improve your business’s cash flow.
Send invoices right away
Sales and invoices should always go hand in hand. You can’t get paid if you don’t send customers invoices, so ensure that you get it done as soon as you complete the sales process. If your invoicing process is ineffective, try using cloud-based accounting software with excellent invoicing capabilities. Remember, the faster you send out invoices, the faster cash comes in.
Get customers to pay invoices on time
Some customers take a very long to pay their invoices, and this can affect your business’s cash flow. To increase the likelihood of getting paid faster, ensure that you always follow up with invoice reminders. Send an email or make a call to late-paying customers a few days before their invoice is due. You can also offer discounts to customers who pay their invoices before a particular time and charge a penalty to those who make late payments. Be upfront about the late payment penalties by including how much will be charged and when it will be charged in the terms and conditions section of your invoices.
Re-evaluate operating expenses
Analyse your business expenses and cut out any unnecessary costs. Small expenses add up over time, so be thorough when doing this. While at it, try and find cheaper alternatives to what is left, but be sure not to compromise on quality. Renegotiate prices with your suppliers and vendors to help reduce the amount of money going out.
If you continue to experience poor cash flow, then it may be time to increase your prices. Sometimes, business owners undercharge their products and services without knowing it, causing cash flow problems. To keep your prices competitive while also ensuring that you make enough profit to sustain your business, work out your costs to see how much you are spending to buy or create your products and compare prices with your competitors to see how much they are charging.
Improve cash flow – where to find out more
Tower offers a full range of finance solutions – products and services aimed at business development and growth. Regardless of how much capital you need or how big you are as a company we can normally help. Our transaction size starts from as a little as £1,000.00 and we have arranged funding facilities for brand new starts ups with little to no trading history to those turning over millions of pounds.