6 Cash Flow Tips To Grow Your Business
Cash flow is simply defined by the finances that enter and exit your business on a monthly basis. For every business owner, maintaining a steady cash flow is crucial and it’s considered the core element of financial health, without it, businesses don’t survive for long. You can forecast cash flow by developing detailed monthly budgets and tracking actual performance.
There are many ways that business owners manage their cash flow, but at the end of the day, the tired and proven methods always work the best. To keep your business’ vital signs in the green zone, we prepared cash flow tips that will help you manage your finances better and ensure stability, so make sure you read on.
Set clear payment terms
One of the most important actionable cashflow ideas on our list are clear payment terms. When putting the contract on the table or planning a new project, be clear about the payment terms so that no cash flow disruption occurs. State clearly when you expect the transaction to happen so you can have a better overview of your monthly outgoing and incoming transactions.
Use clear statements instead of phrases such as net 30 days. Instead, use carefully worded phrasing such as “payment due in 30 days” so that the client can clearly understand what the terms state.
Keep your books in order
You can’t keep track of expenses if your books aren’t in order. Write everything down, from maintenance expenses to lease and material costs. This way, you can forecast cash flow and know when to not make outgoing transactions when you can’t afford to do so.
Take a good note of where your money is going and from where it’s coming in, check to see whether they are some outgoing expenses that you are not aware of, and take care of them as they can disrupt stable cash flow.
To keep ahead of the game, you can automate this process and use software that will help you motor all your expenses and income and ensure that you have a great overview of your cash flow.
Incentivize your customers to pay early
To make sure that cash is always present in the register, offer your customers discounts if they make early payments and create a win-win situation for both parties.
On the other side of business dealings, as a business owner you might always try to delay your payments for as long as possible. But, if you are offered better deals for early payments, don’t hesitate to take them and reduce your outgoing expenses.
Work with people that can afford your services
If your clients aren’t too keen on cash transactions, make sure that you check their credit so that you know whether they can afford your services and that no cash flow disruptions occur and damage your financial health.
Regular credit checks might deter some clients from working with you, but it will ensure that those who work with you pay what they owe for your services on time.
Always lease, rarely buy
Leasing allows you to have the cutting-edge business equipment required to produce the best version of your product. Buying equipment and real estate can usually prove very expensive and make you go over budget.
With the leasing option, you pay in small increments and a big plus is that these expenses can be written off on your taxes since they fall in the category of business expenses.
Have solid cash reserves
Cash shortfalls will eventually occur and your business survival might depend on your financial management skills. A good rule of thumb is to have at least 3 to 6 months’ worth of funds that will keep the cogs of your business turning seamlessly.
Having a reasonable amount of funds in reserves will enable you to come on top of a market downfall when it’s most likely that your cash flow will get disrupted.
Final Thoughts
Maintaining a steady cash flow is very important for every business that wants to remain on the market. Actively go over the books and try to forecast your cash position so that any disruptions are evaded.
Make use of our tips that range from clear payments to keeping cash reserves and watch your business as it grows and reaches new heights.
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