Cash flow is a primary indicator of the health of your business. Your available cash fluctuates based on sales trends, investment strategies, and invoice collection. As a business owner, stay focused on maintaining a positive cash flow. Reviewing cash flow statements and using a factoring company to collect unpaid invoices are two immediate actions you can take to regain control of your company’s financial health. Here are some additional ways to keep you on track.
Acquiring equipment is critical to your business. From copy machines to capital machinery, each item is an opportunity to invest in the health of your business. Equipment leasing typically has lower monthly payments. However, you do not own the equipment at the end of the lease. This strategy is effective for acquiring items that you will not keep long-term or require frequent upgrades.
Encourage Fast Payment
When customers pay invoices promptly, you have more cash on hand. Many business owners successfully implement these policies:
- Offer a discount for early payment.
- Implement EFTs and receive cash faster.
- Use a factoring company to collect accounts payable.
- Require a down payment before services are performed.
- Charge a late fee.
Negotiate Payment Terms
Ask vendors to modify their payment terms to maximize your cash. Credit cards allow you to delay payment and keep cash in your business longer. Avoid late payment or interest charges. Use vendors that provide early payment discounts or purchase rewards.
Spend some time analyzing your business expenses. Unnecessary spending can creep into a business and drain your available cash. Consider these ways to manage expenses:
- Contract with an automotive repair shop to perform maintenance and repairs on your corporate fleet.
- Monitor fuel expenses with company credit cards for each vehicle.
- Donate to non-profit organizations on behalf of customers and vendors instead of holiday gifts.
- Compare insurance rates from other companies to reduce premiums.
- Negotiate better terms with your factoring company.
- Take advantage of social media for free marketing opportunities.
Inventory management impacts the profitability of every company. Balance the amount of product you have on hand to keep you from having to offer deep discounts to free up warehouse space. Excessive quantities of raw materials demand more storage space and maintenance. Think of your real estate as inventory. If you have under-utilized space, consider leasing it to another company to increase your revenue.
Building a successful cash flow strategy is more than simply increasing revenue and decreasing expenses. Business owners that creatively manage this aspect of their business will find their company continues to grow.