Cash is often referred to as the lifeblood of an organisation, a key factor that determines business success or failure. In many cases, cash is vital for daily survival; a small business that doesn’t have enough cash on hand to pay suppliers might not be able to open the next day.
Speeding up the conversion of sales into cash, as well as increasing the spread between inflows (receipts) and outflows (payments) will help to build a cash cushion for business sustainability. With this cushion, you can take advantage of cost-efficient opportunities, fund growth, and more.
Here are some quick tips to improve cash flow for your small business.
Stagger your payments
Avoid sitting down once a month to pay all of your bills in one go. While they all may be due within the same monthly period, the “pay by dates” can differ and you can use this to your advantage. This will provide some buffer in the event of a short-term slump in sales.
Be aware that payment terms may also be flexible. Talk to your vendors, as they may be more than willing to help you out.
Work with your vendors
Although payroll, taxes, rent and utilities are essential payments that are non-negotiable, some suppliers, vendors, or wholesalers offer small businesses flexible payment terms and even early payment or volume discounts.
These suppliers will often continue to deliver as long as a business pays with regularity and before a due date. Take this into account and use to your advantage when organising your monthly payments.
Set collection targets
Setting targets for those responsible for collecting overdue invoices is an excellent way to ensure the task is given the attention needed. Whether you handle collection yourself or you hand it over to certain staff, setting targets provides those involved with ownership to hit and beat targets, and a satisfaction level every time they do so.
Ensure you invoice clients quickly -- as soon as the work is complete is ideal. When to invoice is a factor that is in a business’s own hands and has a significant influence on cash flow.
If you wait a week or two after the work has been completed, it will most likely take longer than that again for the cash to arrive in your bank account.
Make payments easy for your customers
To minimise the gap between invoicing and payment, you should make it as easy as possible for your customers to make payments. One excellent way to ensure this is to establish direct debit as a business norm for collecting receipts. Offer your clients real-time payment options on your tablet or mobile phone.
Keep the bank informed
Remember that banks offer businesses useful services like overdrafts or credits. Communicate with your banker and keep them informed about any unforeseen outgoings and changes to your cashflow. Speak with your bank contact, as they appreciate that.
How we can help…
We’ve recently released a new feature for simPRO: simPRO Payments. simPRO Payments is an all-in-one payment processing solution for trade and contracting businesses.
With simPRO Payments, your customers can make a credit card payment on site after a job is complete through simPRO Connect, online through the Customer Portal, by following a link in an emailed invoice, or over the phone.