In today’s world if there is one thing that is going to determine the health of your business it is your cash flow. Of course there are many financing sources such as Buckingham Leasing. Nevertheless, unless you follow good cash management practices you cannot expect your business to survive and prosper.
Here are a few cash flow management strategies that can help:
Keep your Supplier Payments for the End
Choose suppliers that can offer you an interest-free line of credit so that you get more time to utilize your working capital. Negotiate for good payment terms and early payment discounts so that you can manage your cash flow requirements. You can find many who may be willing to offer such incentives in order to establish good customer relationships and speed up their receivables.
Offer Early Payment Discounts to Your Customers
Have a system to clear your account receivables and try and offer a small discount to those of your customers who clear their bills earlier than the specified date. Even if this does cost you a bit, it can have some positive impacts on your cash flow by lighting a fire under the slow-paying customers.
Revise Your Billing Schedule and Payment Terms
Make it a point to send your invoice along with your shipments. This way you can ensure a shorter cash-flow-conversion period. Also make sure your invoice mentions the due date of the payment along with the payment terms. Provide options for online fund transfers to increase convenience. In case you are providing a service, ask your customers to pay a deposit or advance before you begin work.
Monitor your Accounts and Manage your Collections
Having an efficient accounting department can help you track your payments regularly so that you aren’t left with any overdue accounts. Make it a point to follow up with your customers in case they don’t clear their bills before the specified due date. It might be a good idea to enforce late-payment-penalties. If necessary you can use a collection agency.
Take Proper Precautions before Extending Credit
Extending credit to your customers might be a good way of doing business; but if you don’t take the necessary precautions you may end up with bad cash flow issues. Have your customers fill out credit applications before extending them credit. Make it a point to verify their credit references. Have them sign written agreements to avoid misunderstandings.
Increasing your income sources and cutting down on your expenses is the best way to maintain a healthy cash flow. In addition, the above strategies should help in maximizing returns and maintaining healthy business relationships with your customers as well as suppliers.