Maintaining a healthy cash flow is a big challenge for many small businesses. It can be hard to balance everything so that you have enough cash on hand to pay your bills and your employees’ salariesâ€"and if your credit is tight, coming up with the funds is even more challenging.
A solid cash flow will not only help you pay everything on time, but may also allow you to take advantage of higher-ticket, cost-efficient opportunities, fund expansions, and more. Below are some quick tips to improve the cash flow for your small business.
Earn More Cash With Your Cash
If you keep your cash balances in a personal or business checking account, upgrade to an interest-earning checking account. Most banks offer them, and if you keep a minimum balance, you won’t have to pay a monthly service charge.
The interest rates for checking accounts aren’t terribly high, but you can earn even more by placing the bulk of your funds into higher-paying options like certificates of deposit (CDs), savings accounts or money market accounts and then transferring money to the checking account a few days before you need it.
Put Your Credit to Work
You can save money on office supplies, fuel, client expenses and moreâ€"freeing up the cash you would’ve spent for other thingsâ€"with a loyalty credit card. Look for one that offers rewards you can use on a day-to-day basis.
Some even offer cash rewards that can really add up toward the end of the year.
Hold Off on Paying Your Bills
Many small business owners are conscientious about paying their bills immediately to get them out of the way. However, most vendors and suppliers give you 30 or 60 days to pay billsâ€"and it’s good to take advantage of that grace period. You’ll be able to hold onto your money longer and use it as needed (such as in the event of an emergency) before paying out for bills.
Read over your invoices and find out exactly when bills are due. You can schedule electronic transfers to pay them off on the due date or a few days ahead of time if you’re concerned about potential bank snags or late fees.
Switch to Paperless Systems
The less paper you use, the more you’ll save on printing, postage and other expenses. If you’re not already doing it, consider using electronic invoicing for customers and direct deposit to pay employees.
If you have any paper systems in place, chances are there’s an electronic alternative that will cost you less.
Encourage Faster Payments from Customers and Vendors
Speeding up your collections process can make a big difference in your cash flow. If, like many small businesses, you send out invoices at the end of the month, it’s time to change that process. Instead, invoice immediately upon delivery or completionâ€"so even if the accounts take the 30 or 60 days you allow for payment, you’ll get your money that much faster.
Another way to speed collections is to offer incentives for early payments, like discounts or reward programs. Many people will take advantage of discounts ranging from 2 to 5 percent, especially on larger orders, by rendering immediate payment.
Taking a few easy steps to improve your small business cash flow today will help things run more smoothly and you may see an impact within the first few weeks.
Cash Flow Photo via Shutterstock
