Posted by: garispang | April 30, 2009

8 Tips to Manage Your Cash Flow

It doesn’t matter how many clients you have or how well your business is doing. Without cash, you have no business. You can never remind businesses too many times: “Cash is king.”

Studying your cash flow — transactions of money coming in and money going out — is critical for ensuring you have cash at all times. Some successful businesses find themselves in trouble when they have too many expenses happening at the same time while waiting for customers to pay their invoices.

With these in mind, I offer eight tips for a healthy and happy cash flow.

  1. Add a payment due date on your invoices. Your customers have other bills to pay. Those bills may have a due date. If yours doesn’t, which business do you think the customer will pay first?
  2. Create the invoice on time. Don’t wait days or weeks after you provide the product or service to send an invoice to your customers. In fact, provide the invoice with the product or hand them the invoice after completing the service. For service business, this means you’ll need to have your workers create an invoice before going on site or have a way to do it on site.
  3. Require an advance deposit. This is common for those providing expensive products or services. Many businesses require paying half of the bill before the work and the rest after completing the work.
  4. Accept partial payments. Better to get something now than wait longer with nothing on hand.
  5. Review accounts with late payments. Determine how you can encourage these clients to pay sooner. Arrange a payment plan or give them other payment options.
  6. Provide discounts and penalties. Give discounts for customers who pay early and add a late-payment fee for those who miss the due date.
  7. Review expenses. Do you need all those items? Can you cut costs? Here’s your chance to get creative! It never hurts to try negotiating for a better rate. If you’ve been a customer for a long time, the vendor might cut you a price break.
  8. Deposit payments often. Don’t pile up the checks. Go deposit them as they come in to keep cash flowing.

If your business needs a little cash, you could try invoice financing to improve cash flow. The nice thing about it is that you don’t have anything to pay back like a loan.

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