We all know the saying "It takes money to make money," and you will hear these words from many small business owners. Many small business owners at one time or another have had challenges managing their businesses cash flow. The fact that over 40 percent of small business owners have encountered cash flow difficulties that have had severe repercussions on their business is astonishing. Bizlender wants to help entrepreneurs manage their cash flow for 2018 with some helpful cash flow tips:
Conduct a Cash Flow Projection
By making a cash flow projection, you can trace differences in your business's cash balance by determining income versus expenses. This method will aid you in identifying two fundamental models to a successful business:
- What is the amount of money coming into your business from sales and going out for expenses?
- Identify when during the month the money comes in and out.
Both of these seem simple enough but are essential to helping you forecast the future and paying your bills and employees on time. A projection typically covers the entire year but can be used for monthly, quarterly, and bi-annual as well.
You may not be able to do it all
Starting a new business can be frightening since nearly 80 percent of all companies do not last past their first year of service. Moreover, almost 50 percent of those businesses close due to profitability and or lack business funding. Keeping your eye on your business's cash flow and margins is key to running a successful and profitable business. As you weigh the risk-reward of every expense, recognize some costs will serve to the profitability of your company. These might incorporate hiring a CFO, CPA, or bookkeeper to maintain the finances in check including payroll, benefits and 401k plans.
Rules for engagement
Make sure that your customers, clients, and partners understand the rules of engagement for working with your business. Having a policy in place to handle fees for missed payments, late payments and no payment is essential. Letting your customers know that there are penalties for missing payments upfront will help you collect on the back end. Establishing a collection policy that includes a scheduled agenda from the first invoice sent out all the way up to termination of service can help your collection efforts greatly. Be proactive when collecting outstanding payments, business owners that don't have distinct collections procedures and late payment fees are frequently taken advantage of, and it can be the difference in profitability for your business.
Early payment discounts
After setting-up compatible and transparent terms with your customers, you can take it one step further and offer incentives to specific clients. Implementing a system for your customers to pay you quickly can significantly increase your cash flow. Allowing your clients and partners to set up a payment schedule that best fits their cash flow by empowering them to pick the day to pay could increase on-time payments. Offering discounts for early payments can also incentivize your customers to pay their balances early which in turn decreases your revenue cycle and improves your cash flow. If your business is having difficulties with cash flow, a short-term working capital loan could help stabilize your company and put you back on the road to success. Combine that with preparing a cash flow projection, hiring the right financial help, laying out the rules for engagement, and setting up early payment discounts can get your business on the path to success in the new year.
Researching alternative lending options for hiring? Check out BizLender online or call 855-404-3070. Offering lending solutions since 2013, their professionals put the emphasis on working smarter, not harder, using technology to fund small businesses in as little as 24 hours.