Improving Cash Flow

One of the major hurtles a small business can face today is cash flow, keeping the money coming into the business, so you have it to work with and continue to grow. And to also pay your bills and wages.

Cash flow is critical to any business, and there are some ways to help keep it flowing.

One simple way is through financing, or borrowing money as needed.

This can be through traditional means such as a line of credit, or other alternative financing methods, such as asset-based financing, or revenue-based financing. Revenue-based financing is attractive due to the fact the repayment of the loan is based on profits. If profits are good, the loan payments are higher, if profits are reduced, so is the loan payment.

Yes, they are all loans in some form and need to be repaid, but as long as the business is healthy and earning profits, it is one simple way to keep money flowing.

Another option, depending on the nature of the business is to offer pre-paid discounts.

If your business is seeking longer contracts, offering a larger pre-paid discount for taking out a longer contract makes sense. That way the buyer has an incentive to not just sign with you, but to stay with you longer. It also brings in money quicker as the buyer pays for your product or service upfront. So you get the cash.

Another good idea to keep cash flow moving is offering a payment discount if the buyer pays early. Many companies when they bill out for their services or products, the receivable is on a 30 day payment invoice. The invoice may state payable on receipt, however, many bills state Net 30, which means it is to be paid within 30 days.

Of course if you are the business that has received the bill, you are going to hold onto it and not pay it until the very last day. This is to keep your cash flow moving.

However, as the company presenting the bill, if you offer incentives for early payment, you could very well get paid much sooner than 30 days, and it will improve your cash flow.

Offering a 10% discount on the bill if paid within 10 days or 15 days, can speed up the money being sent to you.

So just a few ways to maintain the cash flow in your business.

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I am discussing all kinds of business and finance topics on this blog and I hope that the information I provide will prove to be useful.