Cash flow - simply stated is how much money you have coming in and how much you have going out. When you are trying to assess your cash flow situation, it can take a lot of time or a short review, depending on what factors have to be considered.
Use Financing to Your Advantage
Credit cards, lines of credit, personal funds, are all places where you can find additional financing, or money coming in, for your business. The key is to use them to your advantage. Credit cards usually come with high interest rates, and should be paid in full on their due date. However, sometimes you need that extra time for payment to be made, so you end up making the minimum payment, and paying in full later. Let's face it - we all have debt, it is a matter of how we manage this debt. Interest is an expense and cuts into your bottom line, so use it wisely. But, more importantly, you need to spend money to make money, so make that expense count!
Make Your Receivables Collectible
It's great if you have clients and are invoicing for your products or services, but if you are not getting paid, you are no further ahead then when you did not have clients. Set your terms of payment on your invoice (typically 30 days, but can be less) and as soon as that term has come up, send an email, or make a phone call and ask when you should be receiving payment. Sometimes you might have to not provide further products or services unless the account is brought up to date. You will usually see a pattern emerge with your customers, in which who will pay early, on time or late. Adjust your reminders accordingly, so the customer knows you have not forgotten about them, and hopefully they will improve their payment habits. More importantly - make it easy for payment using credit cards, paypal, e transfer, and any other electronic payment options.
Negotiate Your Terms for Payables
If you are able to carry an account with your suppliers, negotiating 45 day terms for payment will help to smooth out the timing between getting money from your customers and paying your suppliers. You don't want to be that business where the cheque is always in the mail, and you are always late. You want to build a relationship with your suppliers where they are willing to help you out when times are tight. If a supplier requires immediate payment, then use a business credit card, on the basis you will be paying off the balance on time (as discussed above).
These are just a few of the common cash flow items that can help keep the money coming in more than going out. What tips and tricks do you use in your business for better cash flow? Leave me a comment and pass on the wealth of knowledge!
Entrepreneur, bike spinner, and resident of beautiful Steveston, BC.