Tips on How to Effectively Improve Cash Flow – Improving the cash flow in your business will help prevent money shortages that could lead to various problems. With enough cash, you can pay your employees, rent, bills, and other expenses on time. It will help keep the business operation flowing smoothly. Unfortunately, you might come across customers who don’t pay on time, negatively affecting your cash flow. We listed tips on how to take care of this matter better and improve your company’s cash flow.
Ask for an upfront payment or deposit
When closing a sale, asking for a percentage of the payment will give you added cash. However, it may turn off other customers and make them decide to go to a competitor that does not ask for upfront payment. Therefore, consider this option carefully before implementing it to ensure it will benefit your business.
Study cash flow history and make a forecast
Analysing your previous cash flow can help determine issues you could fix or improve. Moreover, it will help create a more accurate forecast that can develop strategies for handling your income and expenses. If it will take much of your time, and you need help with how to do it, London-based accountants can do the job if your business is located in the city. These accountants are well-versed in analysing, planning, and managing cash flow. Plus, they can help with all other finance or accounting-related matters in your business. For example, they can cover all your accounting activities, or you can customise their service to look after the required tasks.
Upgrade your system
If you’re still relying on the old paper-based invoicing system or using inefficient software, it may be time to upgrade. Some systems let you analyse your cash flow in one click and look quickly at your account receivables and payables. It also enables you to send invoices on time and process payments fast, including online payments. Besides online payments, accepting other payment methods will help improve the cash flow, as customers can pay immediately using their preferred method. Other payment methods include cash, check, and wire transfers.
Offer incentives for early payments
Another way to prevent delays in payments from clients is to offer incentives. For example, you may give them a discount, gift certificate, or anything that would encourage them to pay early. In addition, consider penalties for those who pay late, so they will be more vigilant about paying on time.
As soon as your invoice is ready, send it to clients immediately. Some customers pay instantly as soon as they receive an invoice, which gives you more room for your cash flow.
Eliminate unnecessary expenses
Review your business expenses, and see if there are unnecessary spendings you can eliminate. For example, you might be renting a space that is too big for your needs, so downsizing would help cut unwanted expenses.
Besides your account receivables, your account payables also affect the cash flow. So, analyse the latter too, and read the terms. You can pay them by the end of the allowed duration to avoid penalties and keep cash on hand longer to prevent a shortage.