Small businesses need to have effective and efficient cash flow management to experience long-term success. Without proper management, your company cannot pay its expenses, much less grow and expand. Therefore, these are a few cash management strategies for your small business.
Implement an Effective Collections Strategy
Accounts receivable are seen as assets on your balance sheet, but outstanding balances cannot be used to pay your business expenses. Therefore, you need to implement an accounts receivable strategy. A few tips include requesting the balance, or at least a deposit, for every order when it is taken rather than after it is delivered.
You may also offer discounts for early payments or outdated inventory. You may consider researching and implementing online invoices and payment options. Consider researching new technologies, including automated invoicing, that will help you manage your accounts receivable.
Develop a Strategy for Accounts Payable
You should implement a bill payment strategy. This may include extending your payables. You should also focus on spreading your bills out so that they aren’t all due at the same time. Paying everything at the same time may place you in a precarious position, especially with any suppliers you cannot pay when your accounts are due.
Pay your bills according to priority, where your rent and employee salaries are always paid first. Avoid late payments by paying your expenses on time. You may even receive discounts if you can pay your bills early.
If you are having difficulty paying your expenses, work with your suppliers. You can negotiate discounts, extended payment plans, or flexible payment options. Be sure you know the payment terms for every credit account your business has so that you can pay your suppliers on time at the best rate.
Use Credit Strategically
You should have a credit strategy in your business. One great way to improve your cash flow is to pay your expenses with credit. Using credit helps you keep track of your expenses because every payment is in your online statements and logs. You may also receive rewards, such as cashback, which may actually reduce your expenses.
You may also get a line of credit that can be used to pay select expenses when your cash flow is low. This is especially beneficial when you are waiting for receivables to be paid. Lines of credit can also be used to purchase equipment, cover emergencies, or get you through seasonal lows. If you use credit, be sure you pay your bills based on your payables strategy.
Your short- and long-term business success depends on positive cash flow. Therefore, consider implementing strategies that promote this success.