Improve Your Company's Cash Flow |
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| By: Joseph Anthony | ||
Bill Promptly Ever find yourself so busy building your business that you don't get around to billing regularly? You're not alone. This is a common – but potentially crippling – problem. If you don't already have a system in place, start billing for projects on a regular basis. When taking on longer-term projects or clients, negotiate in advance for regular payments instead of allowing the amount to build up. Create Incentives for Faster Payment Small businesses can sometimes cut the time spent waiting for payment by offering a discount for quick payment. I've received bills from businesses offering discounts of 1% or 2% for payment within 10 days. If I was going to pay the bill within 30 days anyway, I'm likely to pay up right away to get that extra discount. Good for my bottom line; good for the business's cash flow. Avoid Slow Pay and No Pay Customers From the Start The best way to avoid cash-flow problems because of people not paying is to weed them out before they start owing you money. So if someone is about to become a significant customer, do your homework. Check out credit references. Call other businesses that have had a relationship with the client. Use Barter Instead of Cash You could reduce the strain on your immediate cash if you need something from someone and can offer goods or services of your own in return. Trim Your Inventory OK, so you can't go to a "just-in-time" inventory management system like many larger manufacturers. How about "just-in-less-time"? Money spent on inventory is money tha's not producing any interest or savings for you. Sometimes reducing inventory can be pretty simple. I've seen restaurateurs cut back on the size of their wine cellars, focusing on quality wines from a few regions instead of trying to be all things to all diners. If the customer still has good choices, it might not matter that he has fewer than before. Consider Consolidating Your Loans It's often tough for small businesses to borrow money. But I'm surprised at the number of ways entrepreneurs do manage to borrow. One small business owner I know has only one employee, but has four different loans related to his business: an equipment loan, a car loan, a business line of credit and a business credit card. If you also have several loans, review the rates and terms on each one. You may be able to consolidate two or more loans into a lower-interest account and improve cash flow. I'm generally not a fan of stretching out repayments, but if you're thinking of talking to a lender about consolidating existing loans into a new one, you might look at taking on a longer-term loan in exchange for lower payments. |