Managing cash flow is critical to the success of any business: Doing it well ensures that a company can keep up with its bills and make necessary investments while doing it poorly can lead to missed payments and other problems. The following tips can help your business with cash flow management.
One cash flow strategy recommended by Entrepreneur.com is expediting the rate at which your receivables turn into cash. Specific tactics for doing this include offering discounts for early payments, implementing “credit checks on all new noncash customers,” and moving outdated inventory. Aggressively following up on unpaid invoices can help as well.
Cut Equipment Costs
Runaway equipment costs can harm any business’s cash flow. To keep your equipment expenses in check, consider investing in maintenance programs that can head off pricey breakdowns. Additionally, buying used rather than new equipment can also reduce costs.
Consider a Subscription Model
If it makes sense for the product your business sells or the service it provides, implementing a subscription model can ensure regular payments from customers. Essentially, subscriptions keep customers from forgetting to buy things from your company.
Work with Vendors
You should scrutinize all agreements you have with vendors to identify opportunities for cash flow preservation. For example, if a vendor requires payment 45 days after they deliver an item, then it doesn’t make sense to pay before then: The longer you wait to pay, the longer your money can sit in an interest-bearing account, generating money. (Just be sure to make your payments on time. Late payments are never ideal.)
On the flip side, some vendors may sell their goods at a lower price if you pay early. In that case, scrutinize the terms to see if paying early is worth it for your business.
For more advice on running a business, check out Kasher Capital’s other blog posts.