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Start a new business recently? Or maybe you've been running a company for years. Either way, cash flow issues could hold you back from the level of success you deserve or, worse, put you out of business.
Successful businesses - or even functional ones - need positive cash flow. This means money flowing into a business should be greater than the amount of cash that leaves.
"Despite the fact that cash is the lifeblood of a business - the fuel that keeps the engine running - most business owners don't truly have a handle on their cash flow," CPA Philipp Campbell told Inc. Magazine.
In reality calculating cash flow is necessary for everyday operations. So how do you improve cash flow to help your business thrive? With these three tips, you may find yourself excelling at cash flow management.
1. Get Paid Fast And Pay Bills Last
Businesses get paid for their services and/or products - this concept is at the heart of any entrepreneurial pursuit. But one trick to efficient cash flow is for your small business to get paid as soon as possible while you pay other businesses at the last moment.
A lot of business owners mistakenly think it's best to pay bills early. But it's better to keep money in your company's possession as long as possible.
Business owners can pay their invoices the day they're due and avoid practices like giving employees advances in order to maximize the operating cash a company has at any given moment. With Intuit's financial management software, you can set up notification features to remind you when bills are due so you can pay at the last minute without ever worrying about late payments.
But at the same time, entrepreneurs should not let clients get away with this! Encourage early payments and chase after your invoices the minute they're late so you can get the money you deserve and have a bigger operating budget.
2. Get More Money Upfront: Cash In On Continuity Sales
You should already be asking clients to give you money on time, but why not ask them to give you more money upfront? Continuity sales are an excellent way to improve cash flow well into the future.
A continuity program is a company's sales offer when a consumer receives - and is charged for - merchandise and services automatically over an extended period of time. Continuity sales can be thought of as a contract where clients purchase services now that they'll get over intervals of time.
This is a big commitment for consumers, but they'll be getting a better rate than if they bought services every month. It also means you get more funds.
3. Be A Penny Pincher: Check Your Cash Flow Projection Before You Buy
After implementing strategies to maximize your operating cash flow, it's important to practice good spending habits.
A good rule of thumb is to avoid buying what you don't need. Do you really need that brand new printer or the large computer monitor? Also, you don't want an overstock of inventory. Remember, every item sitting on your shelves should be able to be transformed into cash... or it's a waste.
Small business owners can get help with financial software that helps them manage operating funds. Intuit offers software that gives entrepreneurs a cash flow projection so they can predict how much money they can really afford to spend.
With these tips, you might soon find yourself with a positive cash flow, and then you can start focusing on profits.
Try it free! Download QuickBooks Pro, and manage your cash flow with ease
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