If you’re a small business owner, you know that a steady influx of cash is the lifeblood of your company. It’s not only what keeps your business operating, but thriving. When you improve cash flow, you have more revenue for day-to-day operations and innovation. Yet it can be hard to balance fast collection of receivables with a slowed outflow of payables — all without alienating your customers or suppliers. Here are a few tips to help you strike that balance and improve your company’s cash flow.
Ask for deposits on large or custom orders.
Requiring a security deposit of 40% or 50% of a product’s cost will reduce your risk of taking a hit financially if a timely payment isn’t received. This is especially important with custom orders as they usually don’t have great resale value.
Accept major credit cards.
Today’s consumers expect to have the ability to use their credit card for purchases at all businesses, large and small. You’ll get your payments up front, and your customers will appreciate the convenience.
Reward customers for paying early.
Developing a discount program for quick payments may not help your bottom line, but it will boost cash flow and possibly fuel growth. The discount can be as little as 2% — just be sure you can afford it before offering.
Send invoices quickly.
The faster invoices are sent to customers, the sooner you can start seeing receivables. Emphasize the due date in several places and don’t hesitate to send payment reminders, especially with customers who tend to pay late.
Sell old inventory.
Getting rid of poor selling or overstocked inventory can free up more cash to focus on your big selling items. While it may hurt to offer old inventory at a discount, it can be the key to moving inventory out and cash in.
Experiment with pricing.
If you haven’t updated your pricing in a while, it may be time to reevaluate. Perhaps your competition has undercut you, causing you to lose business. Or maybe prices have risen across the industry and you’re lagging behind, contributing to a loss in potential cash flow.
Want more help improving your cash flow? Explore the treasury management services available at United Community Bank. Call 1-800-UCBANK1 (1-800-822-2651) for more information.