Larger corporations have the advantage of having treasury managers or accounting staff on hand to assist with cash management theories and techniques. With the help of sophisticated models and tools to at their disposal to predict and manage cash, it can be fairly easy for them to keep things under wraps. However, for smaller businesses, these luxuries often come with a price tag you can’t afford.
So is it possible for small businesses to manage cash flow without having the resources or capital of a larger corporation? Of course it is. With a bit of strategic planning and financial resources on your side, you can ensure that you have the cash you need to effectively run your business. Below are a few solutions to improving cash flow within your small business:
1. Lease Instead of Purchasing
When it comes to company supplies, equipment, or real estate sometimes leasing can be the better option. Though it may seem as if leasing would eventually cost more than it would to purchase, leasing can be a feasible way to make sure that you have a stream of cash accessible for daily operations. Leasing allows business owners to pay for expenses in smaller increments. Not to mention that leasing can also be written off as a business expense around tax time.
2. Work with Factoring Companies
Do you find that a lot of your cash is tied up in receivables? If you frequently bill consumers for products or services and have a hard time getting them to pay in a timely fashion you may want to consider invoice factoring. Service providers such as TBS Factoring offer small businesses the opportunity to sell or take out a loan on outstanding invoices. While you won’t get the full value of the invoice, it does allow you to utilize the cash the moment you need it.
3. Offer Incentives and Discounts
When it comes to getting customers to pay on time, incentives are going to be your best advantage. By offering a percentage off an invoice for payments that are paid on or ahead of time, you encourage customers to want to do the right thing. The discount of course should not be more than you can afford to give, but even something as small as 5% could make a big difference to your customers. Other incentives might include discounts on future purchases or free promotional merchandise.
4. Improve Inventory
Monitoring inventory is imperative to managing cash flow. You may come to find that you have more products in stock that are tying up cash. Rather than investing more money into items that don’t sell, it is beneficial to get rid of it. Selling products at a discount can free up cash and space for products that your consumers are more interested in.
5. Renegotiate Terms with Suppliers
If you have a great working relationship with your suppliers, discuss the possibility of lowering the cost. Many suppliers want to keep your business and may be willing to come down off the cost of their services to appeal to your interests.
6. Increase Prices
Increasing the prices of your products or services in small increments can actually help to improve cash flow. Though increasing prices might seem like a surefire way to send your customers running in the other direction, there are ways to avoid this.
The bottom line is you need efficient cash flow on hand to manage the day-to-day operations of your business. If you find that your funds are all tied up, leaving you with little money to cover expenses, it is time to re-evaluate some things. Employing the above mentioned methods into your accounting practices is a significant start towards safeguarding your business and building a nest egg.
from Darlene Milligan http://ift.tt/1QpbbPK via transformational marketing
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