All the answers to your unique business lifestage questions
Cash flow, or the pattern of money coming into and going out of your business, determines if you stay in business. Fortunately, you don't have to be at the mercy of your debtors and creditors. Follow these tips to better manage your cash:
- Regularly review when you expect to receive money and pay it out. Know when your customers pay you, and when they fall behind.
- Offer discounts for early payment.
- Ask for a deposit. You can put the money to good use while you fulfil the order.
- Keep an eye on the three main cash flow accounts - accounts receivable; accounts payable; and inventory.
- Examine supplier and customer credit terms. If you understand how these relate to each other you can pre-empt potential problems.
- Ensure there are processes to keep cash flowing in as well as out. For example, don't send out invoices at the end of the month, send them as soon as the job is complete.
- Avoid slow-pay/no-pay customers. Weed them out before they start owing you money. If someone is about to become a significant customer, first check out their payment track record.
- Use barter instead of cash. If you need something from someone and can offer goods or services of your own in return, do it. This reduces the strain on your immediate cash.
- Trim your inventory. Money spent on inventory is not producing any interest or savings. Find clever ways to keep it down. For example, a restaurateur can cut back on the size of his wine cellar by focusing on a smaller number of better quality wines.
- Consolidate your loans. If you have several loans, review the rate and terms of each. If you can, consolidate them into a lower-interest account. You could also consider extending the term in exchange for lower payments.