Options to improve cash flow for your business

Starting a business is hard work. It takes time, money, patience, and perseverance. But now that you have your business up and running, you then need to focus on improving your cash flow.

Your cash flow consists of not only your sales, but your collections as well. An increased cash flow not only increases the value of your business, but it also provides financial security along with the opportunity to improve or introduce new products, hire needed help, and spend more money growing your business.

The following are some options for improving your cash flow:

Make and stick to a budget.
All businesses should do a projected budget each year to determine where money is going and how much should be spent. If you don't have one, sit down and make one. You can do this using financial software such as Quicken or Microsoft Money, or you can use a simple Excel spreadsheet. Once you have made a budget, do your best to stick to it. This will improve your cash flow by helping curb unnecessary expenses. Evaluate your budget every few months and make revisions if necessary.

Increase your prices
You should increase your prices occasionally, which is expected in keeping with inflation, demand, and so forth. If you are hesitant to do this, try it out for a little while and see the response you get. There is the potential you will lose a few customers, but keep in mind that if you do it correctly (don't increase prices more than 5% or at most 10%, for lower priced products and services) you will not lose customers and will increase cash flow.

Evaluate your marketing
Use only marketing strategies that have proven to work. If you find your current practices are not bringing in the customers you want, then use only the marketing efforts that are profitable for you. You may also try and drum up business and increase your cash flow by getting someone to endorse you, or having another company recommend your products and services to their customers.

Avoid "bad" customers.
You may find that you'll come across customers who pay late consistently, have credit issues, or customers you have to send to collections. Avoid these customers from the beginning by having credit requirements or by requiring cash payments of certain services. And if bad payment habits get to be a habit, consider dropping them as customers completely.

Invest extra cash
When you come to a point where you can pretty much guarantee a certain amount of cash flow and you know you can cover all of your expenses, you may want to consider investing some of that extra money. This can result in an improved cash flow down the line and help you to increase your business's financial state.

Offer incentives/penalties
In order to get your customers to pay on time as well as improve your cash flow, implement late penalties if you don't already. This could be a set dollar amount (say, $25 late fee) or a certain percentage of the balance. Whether you are collecting late fees or getting paid on time, either way it will be an improvement for your cash flow.

Improving cash flow is the key to growth for any business. The