One of the biggest challenges that many small businesses face is following up on late payments, which can consume valuable time and resources. Having no cash to hand to take care of day-to-day expenses is a major reason why many businesses fail. In this blog, we'll run through some tips to help you maintain a positive cash flow for your small business:
5 Tips on How to Help Improve Cash Flow in Small Business -
Encourage customers to pay on time
The easiest way to eliminate cash flow problems is by ensuring, as far as possible, that you receive payment for goods and services on time. There are a number of ways you can do this. Try offering early payment discounts to customers who pay up front, for example, or shorten your payment terms from 30, 45 or 60 days to immediately after a project is completed. Asking for payment at specific stages of a project, or when certain milestones are completed, is another way to ensure the money keeps coming in.
Delay your payables
You can buy time by delaying or extending payables to vendors who don’t demand immediate payment. However, you should be careful not to damage the working relationship with your distributors. Only delay your payables if you are sure that your suppliers are OK with it - and watch out for any late fees!
Provide numerous payment options for your customers
Most payment delays are due to restrictions imposed by certain payment methods - the reasons checks are less popular these days is because of the time it takes for them to clear. Most customers will be happy to pay with credit or debit card, but consider accepting direct bank transfers, PayPal payments, and e-checks if you don't already do so.
Use the right cash-flow management tools
You need the right software to keep track of money inflow and outflow. With the right tools, you can save time and have a clearer, more informed picture of your payables and receivables.
Consider short-term financing
Taking out a short-term loan can help your business if you're facing a shortfall due to delayed payments from your clients. Short-term credit helps to cover the gap between receivables and payables, or settle emergency purchases. You can use these funds to pay your distributors. Fast small business loans from a strategic funding source like LVRG is the first step in growing your business.
For more assistance on how to finance your small business, or to find out what small business capital loans you qualify for, contact LVRG today. We offer various small business funding options to keep your business running without any hitches.