Plastic may be queen, but cash is still king – and we’re always looking for more of it regardless of the business we’re in. If you surveyed merchants, 90% would say they needed to increase cash flow or wouldn’t mind it if this happened. The other 10% – well, something’s fishy there.
The main reason customers delay or outright fail to make payment is because they forget. Plain and simple. To cope with this…and our first tip.
1] Send Invoices Immediately
If you don’t send invoices, you won’t get paid. It’s that simple. Don’t be late in invoicing your customers. The faster you send invoices out, the faster the cash comes in. Why don’t companies send invoices, you ask.
Usually, it’s because their invoicing process is tedious. If this is the case, why don’t you switching to cloud-based accounting software? It will make invoices easy and even fun to create.
The best POS systems have capabilities which can help you speed up your invoicing process and increase your cash flow.
This brings us to our second tip.
2] Get Clients To Pay On Time
Easier said than done, we know. The good news is there are lots of practical strategies to increase the likelihood of getting paid faster. We’ve laid out some of them below.
Send Out Reminders
After sending an invoice, follow up with a reminder. Send these out a few days before the invoice is due, on the actual due date, and again a few days later. If payment still hasn’t been made, give your customers a call and keep sending reminders. Many POS systems have built-in invoice reminders that you can send to late payers automatically.
Charge A Fee on Late Payments
A solid invoicing policy is another key to successful invoicing. Choose a consistent time when invoices are due (ex. due upon receipt, Net-15, Net-30, etc) and always go by it.
Clients who miss the deadline owe a late payment penalty. And enforce this penalty. This will not only set you apart as a professional, but also improve your chances of getting your money.
When it comes to late payment fees, be open and honest about the penalty, when and how much will be charged. This can often be included in your terms and conditions section on your invoice. Before introducing it, do some research on what a normal late penalty policy looks like for your industry.
Incentivize Your Customers
Think about giving customers who pay their invoices on time or before a certain time discounts. If your invoice terms are so-called Net 30, which means the invoice is due within 30 days of being sent, offer a small discount to those customers who pay their invoices in the first week after receiving it.
This makes for a nice incentive. Customers looking for a good deal will be more prone to paying their invoices faster, which means you get money faster – and improve cash flow, which is the ultimate goal.
3] Reduce Unnecessary Expenses
Take a cold, hard look at your profit and loss statement and analyze your business expenses. Ask yourself if they are really necessary and if so, could there be a cheaper alternative. Consider your current expenses carefully and eliminate any unnecessary ones.
Attempt to minimize the necessary expenses insofar possible. It may seem hard to do, but your business will start doing much better when you learn to manage your expenses and cash flow effectively.
Reassess Operating Expenses
There’s more to managing cash flow than getting more cash to come into your company. You also need to reduce the cash leaving it as much as possible. Here are some tips to cut down on operating expenses, so you have more cash to spare.
Streamline Your Business Processes
Ensuring that your business is running as efficiently as possible is another important aspect of managing your cash flow. Concentrate on reducing time as well as costs. Assess all of your current business processes and decide how efficient the current process is.
If not, ask yourself if there’s any way to speed it up. This might mean implementing accounting software to send invoices faster or rethinking your employees’ inventory assembly process.
You can get more done, spend less on salaries, and avoid high overtime pay by using your time more efficiently. Overtime in particular tends to put a big dent in businesses’ cash flow.
Inquiry about Bulk Inventory Rates
Some suppliers, particularly those with whom you work well, could offer discounts for buying inventory in bulk. Don’t hesitate to ask your vendors if they have any deals because these can definitely be worth taking advantage of.
Buy More Efficient Equipment
One way to increase your company’s efficiency and speed is to purchase better, updated technology and equipment. Ultimately, you will save time, which reduces wage expenses.
The downside is that it may cost a bit to buy the equipment initially. This may also lead to the ability to take on extra projects or increased production, which both lead to increased cash flow.
Consider Leasing Equipment
It might be worth considering leasing equipment if you don’t qualify for a working capital loan or don’t have the cash to flat out buy equipment. You lose the benefit of having the equipment as a fixed asset for your business, but you get lower monthly payments, which will help keep your cash flow in check.
Take Invoice Factoring into Consideration
If these strategies don’t work or you need cash urgently, invoice factoring is another option. Invoicing factoring involves selling your due invoices to a company in exchange for immediate cash.
The factoring company will take a portion of that debt, sometimes a substantial one, but at least you aren’t stuck waiting on customers. You have to balance the pros against the cons and decide for your specific business.
Invoice factoring and invoice financing are both great cash flow solutions. There are quite a few invoice financing providers on the market. They offer great alternative solutions.
Thank you for reading and good luck! May the King bless you.