Steps to boost cashflow in business

Steps to boost cashflow

Money makes the world go ’round. Here’s how to make sure you’re hanging on to enough of it to maintain and grow your business.

Whether you own a one-person business or a corporation with multiple locations and dozens of employees, staying on top of your business’s cash flow is crucial to success. Simply put, cash flow refers to the “income” and “outgo” of your business’s cash. Just as with your personal checking account, falling short of funds for necessary expenses can leave you in a world of hurt.

By monitoring and managing your flow, however, you can make sure your business has enough cash on hand to meet expenses and that you have enough extra money to invest in growing your business. Here’s how (Steps to boost cashflow):

 

  1. Begin with the basics.

To get a grip on your cash flow, start by learning the basics of accounting. Even if you have an accountant or bookkeeper handling your day-to-day finances and billing, it’s important to understand general accounting principles and how they apply to your operations. Simplify money management by choosing accounting software that lets you easily monitor your cash flow and generate financial reports.

 

  1. Get a business line of credit.

If your business has seasonal peaks and valleys or if you regularly need capital to purchase inventory or materials to fill orders, a business line of credit can help ensure you always have the necessary cash to meet your needs. Lines of credit are intended to provide short-term working capital, not to buy real estate, equipment or other long-term assets.

Because you’ll need to show positive cash flow to get a line of credit, the time to apply for one is before you need it. If you want an unsecured line of credit (that is, if you don’t want to put up collateral), you’ll need good cash flow, an excellent financial track record and several sources of repayment. Business lines of credit are available from banks and other financial institutions.

 

  1. Get a merchant account to accept credit cards.

If your business doesn’t already accept payment by credit card, establishing a merchant account is a smart move to improve your cash flow. Yes, you will pay fees to accept Visa, MasterCard and the like, but depositing funds into your bank account immediately is worth the trade-off.

Getting paid faster isn’t the only benefit of accepting credit cards. Taking plastic ensures you don’t lose a sale because the customer doesn’t have cash (millennials often carry none at all); it also protects you from the risk of bad checks and makes your business appear legitimate in customers’ eyes. Business-to-business companies can also benefit from accepting credit cards. Many times, you will be paid faster and with less red tape if buyers can simply use their corporate credit cards to pay your invoice. If your volume of credit card transactions is likely to be small, using mobile-payment services could be more cost-effective.

 

  1. Invoice immediately.

Do you wait until the end of the month to send invoices? Do you sometimes forget to send invoices? Surprisingly, many small-business owners let billing slip through the cracks. Invoicing is the foundation of good cash flow.

That’s why it’s important to invoice as soon as you can. Unless your agreement with a client specifies otherwise, turn in a bill right away when a service is completed, or a product is delivered. Use your accounting software to automate invoicing and remind you when to create and send invoices. Speed up the process even more by emailing your invoices and by setting up online payment options. Your bank can help you with this.

Before sending an invoice, make sure you get the name of the specific person to send it to, as well as her department, physical address, email address and phone number. Also make your invoices as clear and easy to read as possible. Key information, such as the amount due, date due and how to remit payment, should be easy to see at a glance.

 

  1. Perfect payables and receivables.

Keep your cash flowing upstream by wisely managing both your accounts receivable (what’s owed to you) and accounts payable (what you owe others). In general, your goal should be to accelerate receivables and defer payables. In other words, get paid faster and pay others more slowly.

The first step in getting paid faster is invoicing correctly and on time, as discussed above. Equally important is following up right away when payments aren’t received on time. Invest in software that helps you stay on top of receivables by integrating with your invoicing and accounting system to track when payments are due, remind you to follow up with late payers and more.

Depending on your profit margins and cash flow needs, it may be worthwhile to offer discounts for early payments or for cash payments. Conversely, your contracts should inform customers that late payments will incur interest and/or fines.

At the same time, figure out how late you can pay your bills without incurring fines or late fees or damaging your business’s credit. Setting up recurring payments on a certain date of the month and paying bills online are good ways to safely pay at the last minute. Steps to boost cashflow: step six next.

  1. Get a business credit card.

Business credit cards help you manage expenses and handle cash-flow emergencies. They enable you to make business purchases without using your personal credit cards, which is important for both establishing a business credit rating and protecting your personal credit. If you have employees, issuing business credit cards to them is an excellent way to limit, track and monitor their spending. A bonus: Many business credit cards offer rewards such as travel points or upgrades, or points that can be used to make purchases at office supply stores.

When shopping for the business credit card that’s right for you, consider interest rates (not just the introductory rate, but ongoing rates and whether rates are fixed or variable), credit limits, late fees and penalties, rewards, and annual fees.

 

Caheck this article out “managing cashflow when business is booming”

like our article”Steps to boost cashflow”? kindly drop a comment in the comment section below 

Related Articles

Guiding principles for a successful business How is it that one business can take resources and create profit while another can take the same

As a small business owner, a deep understanding of your company’s financial situation drastically improves your chance of long-term success. When you know exactly

Checks and Balances For Small Businesses: When your designing your business structures, you want to make sure you’re hoping for the best from your

Contact Us

Address

17 Military street, Onikan, Lagos Island, Lagos, Nigeria.

Phone

+234 703 417 2590

Email

info@midridgeinternational.com

Subscribe Now For Exclusive Offers And Updates!

Subscribe to our newsletter for the most recent blog posts, promotions, and updates delivered right to your inbox.