Five ways to improve your cashflow

When you’re running a small business, cash is nearly always your main concern. Even if you plan to take several big payments next week, this is no help at all if you have suppliers, rent and employees who all need paying by tomorrow. Here are five ways to improve your cashflow.
Invoice promptly and regularly
When you’re busy, it can be easy to get into the habit of leaving it a few days before you send out invoices. For a healthy cashflow, you should always invoice immediately. If you’re working on a large project that will span across several months, set up an agreement whereby you’ll receive payment at key stages throughout the assignment.
Set your payment terms and enforce them
Before deciding how long you’ll give your customers to pay your bills, have a look around to see what your competitors are doing. You might find that you’re allowing customers to wait too long before paying you. Of course, your decision should also be based upon how quickly you need that cash to cover your expenses, but looking at what other businesses are doing is often wise.

Once you’ve decided upon your terms, make sure that you enforce them. Always check that customers fully understand when their payments must be made, and chase them up immediately if they are overdue. Having a standardized collections procedure in place is an option that many businesses find useful.

When taking on new business, discuss your payment terms from the very beginning. It can also be a good idea to do a little bit of research around what your new customer will be like. If possible, check out credit references and assess whether you can rely on their payments.
Reward customers for paying early
Consider setting an incentive for customers to pay early. For example, you could offer 2% off invoices that are paid within ten days. You may find that it’s an easy, low cost way to get cash flowing into your account quicker.
Renegotiate payment terms with suppliers
It may be possible that your suppliers will be willing to extend their payment terms. Find out what their competitors are offering, and if possible, renegotiate your deal. Alternatively, you could ask whether they would be willing to offer a discount if you paid early. Though this won’t solve your cashflow issue, the saving could make a big difference to your bottom line.
Plan ahead
Never underestimate just how important it is to plan ahead when it comes to cashflow. Forecasts may never be 100% accurate, but they will give you a good understanding of what you have to pay for and where your money will be coming from. If you need assistance with this, contact an accounting professional, modern accountancy firms should provide a complete service that assists in all financial areas of your business. They will be able to help you with detailed financial planning.
Improving your cashflow can be great for your business, as well as your own peace of mind. Though it can seem complicated to manage, it is worthwhile to spend a little time looking at how you can make a few small changes that will vastly improve the health of your business bank account.

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