The Importance Of Maintaining A Good Cash Flow

In simple terms, a company’s cash flow refers to the amount of money it moves in and out. Is your company making more money than it is spending? If so, you are maintaining a good cash flow. Naturally, having even a basic understanding of cash flow is necessary in order run a business. All business owners want to avoid debt. However, maintaining a good cash flow doesn’t always come so easy.

What can you do to ensure your company’s cash flow is strong?

Send invoices out immediately.

It always pays to provide excellent customer service. Endearing yourselves to customers via your helpful ways and charming personality will always be good for business. It’s wise to not be too friendly, however. When payment is due, it’s time to communicate your firm requests for it. Some business owners choose to delay the sending out of their invoices as a supposed convenience to customers. This only delays the receipt of payment and hurts their cash flow situations.

“If you’re having cash flow problems, you might want to consider accelerating your billing process,” alerts Brandon Chu on Bplans.com, “Possibly sending out invoices the moment when jobs are complete and orders are shipped. In doing so, you ensure that your clients get their invoices faster—which hopefully means you’ll get paid quicker.”

Ask your customers to pay early.

Sending out your invoices in a timely fashion is one thing. Asking for early payments is another. Receiving payments by due dates is all well and good. However, when the payments you require arrive early, you’re able to guarantee liquid cash for your company’s immediate needs. Signature Analytics suggests that, in order to get payments early, you offer your customers certain perks and/or benefits.

“For example, if your payment terms are net 30, consider offering a slight discount for customers paying net 10,” offers their website, “Are you currently waiting for cheques to arrive? Offering a variety of payment options will make it as easy as possible for a customer to pay you, such as ACH or credit card payments.”

Carefully manage your inventory.

Your decision making, as it relates to inventory, is a vital part of maintaining a good cash flow. It’s imperative that you do not purchase more inventory than what is necessary. Of course, this involves an analysis of your sales numbers. Which products move the quickest and require restocking the most often? Ordering inventory that simply sits on the shelves will not generate income. This is only going to worsen your cash flow.

“Review your current inventory and take note of merchandise that doesn’t move at the same pace as other items,” advises Chu, “Instead of buying more, try to sell what you have and either eliminate it as part of your sales pipeline or decrease the amount you purchase.”

For many years, Synergy Merchants’ unique merchant cash advance program has been helping small and medium-sized Canadian business owners to maintain better cash flows. For information about how our program can help you, please don’t hesitate to call us at 1-877-718-2026 or email us at info@synergymerchants.com. You can also apply online for a free, no obligation quote!