By Bernadine Racoma
If you are keen on improving the cash flow of your small business, you have to know this from the beginning – you can either control your expenses, or you can regulate your income. Doing either of the two will benefit your business in different ways, but if you can do both, then so much the better. A lot of businesses go down in their first year alone simply because they have not been able to handle their cash flow; they become buried in debt or are desperately trying to get the stock they need without the means to do so.
Know this as well: there will always be unforeseen events, and your business has to be prepared for these events so you can weather the storm and grow stronger in the end. If you are worried about your cash flow and would like to find ways to improve it, here are the top ways you can improve your business’ cash flow.
Know the flow of your finances
The first step to taking charge of and improving your business cash flow is to know the flow of your finances. Have a good understanding of how you get your income and what your expenditures are. This comes with being accurate with all the financial transactions and information you have. To make it easier and much simpler to manage your accounts, you can invest in the proper software so you can have the information you need in real time and will be able to see how (and where) your cash is moving.
Establish a good procedure for debt collection
Controlling your credit and having a good process and procedure for debt collection are also keys to enhancing your enterprise’s cash flow. A lot of companies today find it hard to manage and collect debts. Debt is one of the biggest threats to many small and medium-sized businesses’ survival. You should, therefore, establish a good and effective procedure for the collection of debt.
For instance, make sure to do follow-up calls after a specific period, and re-issue invoices but make sure to do it only a couple of times before issuing a fine or penalty for late payment. Remember that the longer it takes for you to collect a debt, the more difficult it will be to have it settled. If you offer a 30-day term of payment for your clients, make sure to call on the 31st day and remind them of their overdue payment if it hasn’t arrived.
Harness and make use of proper plans of payment with your clients
You need to be aware of your clients’ payment cycles – in other words, know when they settle their debts and pay their invoices each month, as recommended by the experienced accountants firm www.gsmaccountants.co.uk. Once you have the right info, you can then harness and make use of a proper payment plan with them. If you can, try to negotiate earlier payments with your clients, and you can encourage them by offering various incentives such as giving discounts if they settle their bill before their due date.
Make sure your invoices are always correct
Lastly, but equally important, make sure your invoices are always correct. A lot of businesses experience non-payment simply because the invoices they sent out were wrong from the start, so make sure you have the right amount in your invoices – and send them to the right client as well.
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Bernadine Racoma is the Content Manager of eTranslation Services. Her long experience in an international development institution and extensive travels have provided her a wealth of knowledge and insights into cultural diversity. She writes to inform, engage, and share the idea of the Internet being a useful platform for communicating, knowledge sharing, educating, and entertaining. You can find Bernadine Racoma at Twitter.
