It takes money to make money. Everyone knows that. And the most successful of business owners are the ones who are adept at taking the money they have and turning it into greater profits. Naturally, business success entails making more than you spend. This is what makes maintaining a good cash flow so important.
Managing your cash flow is a necessity because you always need money on hand to pay for things that aren’t necessarily linked to helping your bottom line. Your rent, employee payrolls, shipping costs – these and many other expenses are always necessary.
Are you maintaining a good cash flow? Here are three ways to ensure that you do:
1. Become better at budgeting.
Let’s start with a simple piece of advice. Create a budget. Outline all of your monthly expenses and compare them to your average monthly earnings. Naturally, you’ll want to make sure you’re not spending more than you can afford. Don’t go over budget. It’s a business killer!
“To know what your present cash flow is, you’ll have to draw up a budget,” confirms Finder.com, “One side will have all the bills you need to pay. The other will have your business’s earnings. To maintain a positive cash flow, you must always have excess in your earnings column. Failure to do something about it now will make it harder when you start missing payments and your credit rating becomes affected.”
2. Avoid offering huge discounts.
Too many business owners get caught up with the idea of offering savings as ways to advertise their goods. While discount prices will most often attract customers, you don’t want to shave too much off the top of your prices. In other words, huge discounts can hurt bottom lines. As Nadir mentions on LedgersOnline.com, this is especially true for new businesses.
“When launching a new business it can also be tempting to offer large discounts to potential customers in an effort to gain their loyalty,” he notes, “This type of strategy can be equally detrimental to your cash flow by reducing your profit or devaluing your service. You should reserve generous discounts for retained, loyal customers who meet strict criteria rather than offering them to everyone to make sure your profit isn’t affected and ultimately your cash flow.”
3. Charge penalties on late payments.
It’s not fair to your business to have it suffer because its customers don’t pay up on time. Just like any other creditor awaiting payments, you should put your clients on notice that their payments are due by specific dates. Late payments should incur charges. That way, you can grow the potential of having your invoices paid off a lot quicker.
“There are many ways your cash flow can dry up, but it can be especially problematic if you’ve been too lenient with payments from your customers,” says Finder.com, “Some debtors like to hang onto their money for as long as they can. If you have many debtors doing this, your cash flow can dry up. If this is the case, you can do something about it by sending timely invoices and clearly enforcing fees for late payments.”
If you need help to maintain a good cash flow at your business, Synergy Merchants’ merchant cash advance program can help you! For information on how we can get cash in your hands within 24 hours, please don’t hesitate to call us at 1-877-718-2026 or email us at firstname.lastname@example.org.