How to have a healthy small business cash flow

One of the basics of running a small business is the need to maintain a healthy cash flow. In fact, having a healthy cash flow can mean the difference between your business prospering and growing, or simply fading away. It is important to remember that adequate cash means that you can meet your obligations. Savvy small business owners don't just add and subtract the numbers, they manage them. If you carefully and thoughtfully manage your cash flow, you can strengthen you company's financial position. Taking these certain steps can help you improve and continually strengthen your business's financial position. Here is what you need to know about how to have a healthy small business cash flow-

• Cut back on business spending wherever you can-One of the first steps to maintaining a healthy cash flow is to hold onto your cash. Be careful that you are not taking money out of the business, for non-business related expenses. Focus on cutting back on spending until it is less than your revenue on a month-by-month basis. That way if an emergency happens, then you will be prepared from a cash standpoint.
• Work to increase your sales-You should make sure you aren't holding on to inventory, that is no longer profitable.If you are, then you need to mark it down and sell it. Remember that storing inventory is costing you money, and selling it at a lower price, is better than not selling it at all.
• Always check customers credit histories-One of the first things you will need to do is decide the type of customer to whom you want to extend credit. Do you want to have a particular cut-off credit score? Keep in mind that if you extend credit to customers with questionable credit histories or low credit scores, you may experience late payments or no payments, which will slow down your cash flow and increase your collection costs. You will want to carefully research who you will extend credit too, and then have a concise and clear credit policy in place, for those customers you offer credit too.
• Carefully keep a detailed record of your customer's payments-You need to always have up-to-date payment records. One of the best ways to keep accurate payments records is by using a specialized accounting software program, that will keep track of your invoices, and when payments are made. This is crucial to keep track of because if customers are late with their payments, it could cause a cash flow bottleneck for you. Having accurate recordkeeping will help solve this problem.
• Make sure that you set appropriate credit terms and offer a cash discount-It is crucial that you customers understand how long they have to pay their bill. In order to speed up the cash they pay, you can want to offer a cash discount to any customer that pays in a specified period of time. You want to make sure that your customer understands all aspects of your credit policy and then offer them an incentive to pay you even sooner.
• Extend your payment schedule for making cash payments-Conversely; maintaining a healthy cash flow has a lot to do with when you pay your bills. While it is important that you pay your bills on time, you should also take advantage of any cash discounts, your suppliers offer you. The key is to hold onto your cash as long as possible. You should not pay your bills weeks earlier than they are due. Remember that your business can use that cash balance, rather than letting your supplier use your company's cash.