One of the most common issues facing business owners is cashflow. When a company is paying more out than they are getting in, they are going to have serious problems. But sometimes it is not the amount going in and out, but the times at which money goes in and out that becomes the problem. For example, if you need to pay your suppliers before your customers make their payments, you might end up struggling. What, then, can be done to improve these cashflow issues?
Ways to Improve Business Cashflow
Give Discounts for Quick Payment
Most customers will expect payment terms that provides them with a set number of days to pay their invoices. This helps them to manage their cashflow, but it may mean that your own cashflow suffers as a result. And even companies with the means to pay their bills early will not do so unless there is an incentive. This is where early payment discounts can help. If you have a shortage in cashflow, then negotiating payment terms with your customers might mean you receive payments earlier.
Reduce Your Outgoings
The most obvious way to boost your cashflow is to spend less than you are generating. This might not make a massive difference initially, but over time you may start to see your cashflow balance heading in the right direction. Think about areas where you can make savings. It might mean cutting down on office supplies or switching to a cheaper supplier.
Factor Your Invoices
The folk at Thales Financial say that factoring invoices is another tool that helps business owners boost their cashflow quickly and easily. With invoice factoring, you effectively sell your invoices to a third-party company who will advance most or all the outstanding amount to you (often on the same day that invoices are submitted). The customer will then settle the invoice on the due date but will pay the factoring company instead of you. There is obviously a fee for this service, but if your customers tend to pay on time then it can be a terrific way to ease any cashflow problems you might have without costing too much.
Manage Your Inventory Effectively
It is important to get a handle on your inventory if you want to keep the cash flowing in the right direction. Buying and storing more stock than you need can put a serious dent in your finances and can mean you are struggling to pay your suppliers when the time is right. It is important to get the balance right when it comes to stock control or you will end up tying up your money in products that are not selling at the rate you require.
Consider Leasing Rather than Buying
Although you might end up paying more over the long term, leasing equipment is often the ideal way to leave yourself with enough cash to run your business effectively. By paying smaller amounts on a monthly basis, you will avoid parting with large sums of cash for essential equipment, which means you will find it easier to pay suppliers when your invoices are due.
Cashflow can become a headache for many business owners, particularly because supplier invoices tend to be due for payment before customers are required to settle theirs. Thankfully, there are many ways of boosting cashflow such as factoring your invoices, offering customers discounts for early payment, and leasing equipment instead of buying.
Implementing some of the above strategies should help you to keep on top of your cashflow, which will ensure the smooth running of the business.