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4 Steps To Manage Your Cash Flow Properly

As you work on managing your small business properly you need to be able to focus your efforts on understanding the cash flow. Without control of your cash flow, you can lose control over your small business quickly. It is important that you understand that your cash flow is the lifeblood of your organization and without it, you can easily have debt problems and it won't take long to lose the company. This is why it is so important to have backup plans on the list like keeping some cash reserves so you have something to fall back on in the event that you do have cash flow concerns to deal with. Why are you having cash flow problems? Poor cash flow is one of the biggest issues you can face and this is why it is vital that you take some time to look at ways to improve the outstanding invoices you have along with extending the payment dates to your creditors.In order to help you out, take these 4 steps to improve your cash flow.

Step # 1 - Understand the debt amount
Before you start you need to do an assessment of where your company is already at. It is important that you find out how much money is owed to your company. When customers aren't paying their invoices on time, you have a hard time being able to stay in business as you are not able to have money in stock to put it towards other things like investing in new products or even raw goods. It is important to know how much money you need to focus on collecting in order to be able to work toward getting proper financing or even to find a way to change your existing collection process. It is vital to know what your break-even point is so that you know how much money you need to collect from the customers and to manage the money properly. Maintain a solid bookkeeping system in order to know that you are able to send out the invoices on time and to prevent invoice from becoming old to the point that it is hard for you to collect money from the customers.

Step # 2 - Create payment options
Why are your customers taking a long time to pay their invoices? It could be for a variety of reasons but one of them may be due to the types of payment options you do not accept. Make sure you are including payment options like credit cards, Bill Me Later, PayPal, and many other options in order to give the customers a plan of action to make their payments. Avoid only accepting checks as this runs a high risk to your company since you may end up with some bounced checks.

Step # 3 - Change your payment due dates
Talk to your vendors and find out if you can extend the payment terms with your vendors. This will help you in being able to have additional time to pay them as you focus on collecting the money from your customers. When you extend the payment terms it can make it easier for you to manage your cash flow without needing to get into debt or to have other issues pertaining to your cash flow problems.

Step # 4 - Call the customers
How often do you call the customers to set up payment arrangements? You need to make sure that you are calling the customers in order to let them know that they are having late payments that you need to collect on. It is important that you do this in order to ensure that you will be able to collect the payments from your customers.

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