Here are some tips:
Deposits for Services: When running a service based business, taking deposits for calendar commitments is a no-brainer. Not only does it boost cash-flow but it also displays good-will on both ends of the deal.
Merchant Account Funding: Regardless of what kind of business is being run or how many credit card transactions being processed, once the transaction is complete, that money belongs to the business.
Next business- day funding should be any business’ standard when processing credit cards with a payment processor. Funds from customer payments should be deposited by the next-business day; anything longer is unacceptable and is hindering the business’ cash flow.
Invoicing: When a project is completed, a product delivered or a service rendered, an invoice should be generated immediately. Some businesses process invoices on a weekly or monthly basis. This practice not only takes away from cash flow but it sends a subliminal message to customers that there is no sense of urgency on the supplier’s part to receive their funds. All kinds of savvy technology is available with the ability to automatically generate invoices or even set-up recurring invoices when necessary.
Incentives for Timely Payments: Offering customers discounts for timely payments is a great motivator. It’s also important to set up your merchant account with the ability to
accept credit card payments over the phone or on the
business website. This gives customers the option of calling or going on-line to make payments instead of mailing checks. Setting up automated e-mails to remind customers of payment incentives is also a great way to solicit payments without having to make individual phone calls.
Cash Flow Charts: The issue of cash flow is pressing enough to set-up specific charts and spreadsheets to be updated on a weekly basis (rather than quarterly). Creating a chart of regular or one-time expenses along with projected sales and definitive income can give managers great insight in to the intricacies of cash flow. Without a thorough, regular investigation of expenses and cash in hand it can very difficult, especially for new businesses to understand what can be done more effectively to increase cash flow.
Separating Accounts: A problem that often plagues smaller businesses is a lack of separation within their business accounts. This is where the advice of a CPA can be extremely helpful. With the right direction, business owners can set up separate accounts making it easier to see revenue generated vs. expenses, not to mention the ability to separate payroll etc.. This practice can also relieve headaches come tax season.
Businesses should think of their cash flow as the equivalent to their bloodflow. Without proper care and attention, a lack of cash flow can suck the life out of any business. The misconception that small businesses are the only ones struggling to manage cash flow is largely a myth. Everyday large companies and corporations are faced with huge budget cuts, lay-offs and downsizing because someone, somewhere was not paying attention to the minute details of their cash flow.
When managed well, healthy cash flow will allow a business to grow, reinvest and prosper.
Has your business struggled with cash flow issues? Have any tips to offer other businesses? Leave your comments below!
About the Author
Rachida Essadiq, Director of Marketing at NTC Texas is a successful five year marketing veteran, running events and campaigns for large to small enterprises and non-profits. She specializes in blogging, social media, branding/ identity and search engine optimization, striving to provide NTC Texas customers and fans with entertaining and valuable educational resources to find success in all areas of their businesses.