In our last blog, we touched upon the topic of cash flow and highlighted its importance in keeping your business afloat. Ensuring that you receive payments in timely manners is critical to your company’s bottom line. And while Synergy Merchants continues to provide Canadian business owners with merchant cash advances to help them with their cash flow problems, there are some other methods that can help them along the way.
Here are four more:
1. Insist upon deposits. In some cases, your customers may not be able to afford the entire amounts of their transactions. With particular big ticket items, this can often be the case. Certainly, that’s understandable. So, don’t feel the need to invoice your customers for the entire amounts. Instead, insist upon deposits and invoice clients for the remaining balances. That way, you know you’ll always have some cash come in with each sale.
This method is encouraged by Matt Quinn on Inc.com. “When working with a unique or custom order, require a security deposit equal to a minimum of 50% of the total price,” he recommends, “One-of-a-kind products have a limited sales value, usually only to the person or company making the order. Without a deposit, you are subject to the risk of having to take a reduced payment at delivery time.”
2. Get rid of unnecessary equipment and inventory. Sure, that fax machine seemed great when you first bought it. But the fact that you haven’t used it in years means that it’s simply taking up space. In fact, you could be sitting on some cash by not getting rid of it. On MoneyCrashers.com, Michael Lewis explains that selling your obsolete equipment or inventory can help your company with its cash flow issues.
“Idle, obsolete, and non-working equipment takes up space and ties up capital which might be used more productively,” he writes, “Equipment that has been owned for a longer period will usually have a book value equal to its salvage value or less, so a sale might result in a taxable gain. This gain should be reported on your tax filings. If you have to sell below the book value, however, you will incur a tax loss, which can be used to offset other profits of the company.”
3. Offer discounts for quicker payments. The quicker you pay, the less it will cost you! This makes for a pretty good slogan, doesn’t it? By declaring it, it’s bound to encourage your customers to not procrastinate with payments. There should be a perk to paying quickly – which is no different than there being a penalty for taking too long to pay. Either way, you’re bound to better secure the cash flow necessary to keep your business running.
“Develop a discount program to encourage quick payments, collecting cash owed to you as fast as possible,” suggests Lewis, “Normal payment terms allow a 30-day period for remittance after the receipt of an invoice, with a 2% discount if paid within the first 10 days. You can offer more, less, or no discount for payment, depending upon your needs and your customers’ previous pay habits.”
4. Make cash flow a company-wide priority. “If improving cash flow is a priority, make sure all of your employees understand that,” insists Quinn, “Remember that your employees will be motivated by the targets you set for them. Obviously, collectors should have collection targets. But even your sales staff should be on board. If a salesperson only has a revenue goal, he or she will work to meet it, regardless of whether the invoices are paid on time or in full. Instead, institute a policy where, if something is written off, the revenue is backed out of commissions.”
In our last blog, we communicated the fact that our unique merchant cash advance program has served as an excellent way for many Canadian business owners to improve cash flow. For more information on our merchant cash advance program or to speak with one of our licensed funding specialists to get a free, no obligation quote, simply call Synergy Merchants at 1-877-718-2026 or email us at email@example.com.