Tue 10 Jun 2008
5 Easy Steps to a Positive Cash Flow
Most small businesses fail due to poor financial planning they run out of cash before the business even has a chance to get going. Therefore, it is essential for every small business to have a positive cash flow.
If you do not have adequate cash on hand when you need it the most, your business expansion plans will be restricted and you may not have enough money to meet your day-to-day expenses.
1. Concentrate on Collections
You should concentrate on collecting payments from your clients. Any delay in collecting payments will only result in less cash available to settle your expenses.
2. Send Invoices Immediately
As soon as your products are sent to your clients, make sure that your invoices are made and sent out.
This will ensure that your accounts department can start processing your pending invoices in a timely manner.
3. Research Your Clients Thoroughly Before Giving Them Any Credit
Conduct thorough research on the credit worthiness of your clients before agreeing to supply products on credit.
That way, clients who have no intention of paying on time will not be able to take advantage of you.
4. Ask Your Suppliers to Increase Your Credit Period
If you have been paying your creditors or suppliers on time, every time, then you could negotiate a longer credit period with them.
This will leave more cash in your accounts for a longer period of time.
5. Look into Taking out a Short Term Loan or Invoice Factoring
These 2 measures can provide you with an immediate injection of cash into your business. However, be aware that you will need to pay interest on both these financial tools.
Use the above 5 tips to stay out of financial trouble - and keep an eye on your expenses to ensure that your money doesn’t simply evaporate. These tips will help you keep your business running successfully.