Providing a snapshot of your business
Cash is the lifeblood of any business, and without it a business can quickly falter or fail. Finding ways to make your money stretch farther is critical to your ability to survive and thrive, so here are three dozen of our favorite ways for improving cash flow and keeping your business strong and vibrant.
1. If 30-days net isn’t working for you, try switching it up to net ten or net 15. Some businesses have seen big improvements in accounts receivables by offering a 2% cash discount for paying in less than fifteen days.
2. Don’t let your receivables rest – make collecting them a top priority.
3. If you have office space that you’re not currently using, offer it for short-term rental.
4. When you provide a product or service, get the bill into the mail as quickly as possible. Delays in invoicing create corresponding delays in payment.
5. Learn your customer’s payment schedule and arrange your invoicing so that they are in sync.
6. If you have vendors that you do a lot of business with, see if you can negotiate more liberal payment schedules.
7. If you owe a large payable, negotiate a payment schedule so that you don’t deplete your entire cash reserve. Most vendors are satisfied as long as they are receiving regular payments.
8. Work with reliable vendors to manipulate your inventory so that certain key items are stocked on a “just in time” basis rather than sitting around unused.
9. Be strategic about fixed asset additions and defer them until a later time.
10. Having a lock box at your bank for depositing cash receipts will facilitate faster payments.
11. Take out loans in conjunction with anticipated cash inflows such as tax refunds.
12. Rather than providing employees with cash travel advances, arrange to reimburse them after the fact for actual expenses. Do not provide them with company credit cards: instead ask them to use their own cards, and if they do not want to pay an annual fee for a card, offer to pay it for them.
13. Arrange to provide bonuses and other cash awards such as profit sharing payments during your peak seasons, when cash reserves are at their highest.
14. Schedule your payroll for several days after the end of each pay period.
15. If you have assets that are not producing revenue, sell them.
16. When making cash deposits, put them into accounts that earn interest.
17. If your business is subject to seasonal dips and surges, request a skip payment arrangement that allows you to make ten payments per year rather than twelve.
18. If you have capital equipment in need of replacement, repair it rather than replacing it for more money.
19. Issue invoices on a more frequent basis, sending them out on a biweekly basis rather than a monthly basis.
20. If you’re operating your business on thin margins, consider raising your prices. It will provide you with more money coming in, and even if clients are paying late, having more money on hand will make up for it.
21. If you have been operating without a budget, start using one. And if you’ve had a budget but haven’t been adhering to it, start.
22. Make an effort to help your customers pay their bills. Online payments are easier than writing a check, and that means you’ll have your cash in hand faster.
23. When a customer places a large order, request milestone payments rather than single payments after receipt.
24. If you have clients that you can trust to pay faster in exchange for discounts, offer it to them.
25. Minimize the number of times you’re paying payroll per month. If you’re paying weekly switch to bi-weekly and if you’re paying bi-weekly, switch to monthly.
26. Take advantage of extended payment terms offered for business expenditures such as insurance premiums.
27. Instead of paying for service contracts up front, negotiate to pay for the life of the contract.
28. Instead of buying items and having to provide a down payment, consider leasing.
29. If you have large contracts with payment terms that are creating challenges, speak with your bank and see whether you can arrange for a short-term line of credit specifically for this expense.
30. When calculating accounts receivable, consider factoring.
31. Do not pay commissions to sales personnel until after the sale has been paid by the client.
32. Request up front deposits from customers prior to starting large jobs.
33. If you have inventory that is either unusable or obsolete, get rid of it.
34. If you are eligible to do so, pay your income tax on a cash basis.
35. Automatic sweep accounts cut down on borrowing and make the most of cash that you’ve invested, so use them.
36. Promote the use of subscription sales for your product – these ensure that you have a predictable flow of cash.
If you need help with your business accounting or financial reporting, contact us at (513) 713-1152 for a convenient appointment.