Balancing the ongoing financial obligations of your business is critical for maintaining a healthy cash flow and ensuring ongoing success. Follow these simple tips to keep business cash flow on target:
1. Regular cash flow analysis
You can find software tools to help you analyse client payment histories against payments you make out of your business. This helps forecast cash flow and reduces the possibility of any nasty surprises. There are many factors which influence cash flow, these include accounts receivable and accounts payable, inventory requirements and the credit terms you offer customers. When you have software tools in place to assist your analysis, you won’t find it difficult to identify or solve likely problems.
2. Pricing changes are an important factor
Keep checking your prices, as increasing prices adds an instant boost to cash flow. Customers expect suppliers to increase charges on a regular basis, so long as you act in a transparent manner and advise your customers beforehand about price changes there should not be any problems.
3. Speed up accounts receivables procedures
Speeding up payments into your business is one way you can ensure consistent cash flow. Some of the methods you might consider for speeding up accounts receivables include offering discounts for prompt payment or setting up a system for deposits with orders. Conducting a credit check on new customers is always advised, as it helps provide you with details on creditworthiness and the likelihood of receiving payment for your goods or services.
Adding your business payment terms to invoices is another means of speeding cash flow into your business. You could add any of the following statements to your invoices to get receipts flowing:
- Payment due upon receipt
- Net 10 (meaning payment is due in ten days)
- Net 20 (indicating that payment is due in 20 days)
If you sell products via your website, keep checking that it’s working correctly and that it is optimised for mobile devices. If you do sell online, your customers should be able to provide payments speedily, which may mean signing up with a provider of instant, online card payments.
Be aware of your inventory requirements and choose your suppliers with care. You may need to use one specific supplier for specialist equipment or goods, however, that doesn’t mean you need to buy everyday products from them as well. You may benefit from huge savings if you spread your stock requirements out over a number of vendors – online purchases and industry catalogues often offer good deals.
It’s wise to conduct regular stock takes of your inventory and don’t be tempted to take advantage of discounts for bulk buys, if you know you won’t use the products in a timely fashion. You should keep a constant eye on ways you can streamline inventory requirements and hold minimal levels of stock.
Cash flow issues can affect all businesses and sole traders, so keeping on top of liquidity will help you ride out the rough times. Contact us at Highwoods & Associates today for all your accountancy and tax needs.