As a business owner, you probably understand the vital importance of cash. To your business, strong cash flow is critical, and this doesn’t just mean generating enough cash to cover expenses; your business isn’t truly sustainable until you have a healthy cash flow that more than covers your costs.
Of course, there are many ways to improve your own financial situation, which can result in more personal funds that you can use to develop your business. For example, completing some training with a reputable provider, such as Knowledge to Action , will enhance your effectiveness at Forex trading and equip you with the skills and knowledge that are critical when buying and selling currency, which will give you an additional stream of income to help support your business.
However, the ultimate goal for your business should be for it to be self-sustaining, so here are five ways you can boost your business’ cash flow.
1. Take Steps to Receive Cash Faster
To boost your cash flow, take action to shorten your receivables and have the cash in your hand more quickly. This means that you need to send invoices as soon as the goods or services have been provided and amend your payment terms, perhaps from 60 days to 30 days.
You may also choose to extend a small discount to customers who settle their accounts early, and a penalty to those who fail to pay on time. You must monitor your receivables frequently and regularly chase up those who pay late.
2. Make Use of Your Business’ Credit Card
It can be helpful to use the credit card of your business to pay suppliers and fund purchases. Be sure to understand the conditions and benefits of credit cards, including any grace periods offered. For example, you may have 21 days following receipt of your statement to finalise payment, and some cards offer cashback features. It’s wise to discuss the features and options with your business banker.
3. Analyse Your Cash Flow
It is quite common for businesses to go through cycles of highs and lows. A cash flow analysis will help to identify the cycles that apply to your business. This information is useful and can help you to make sensible financial choices and arrangements, such as the timing of your borrowing, staffing arrangements, and opportunities to bolster your marketing efforts during low periods.
4. Use the Support of an Accountant
Instead of thinking of the services of an accountant as an expense, think of them as an investment. A credible, effective accountant can help you review your cash flow projections and results, and offer you insights into areas you may not be aware of or may not have considered. An accountant can also help you anticipate cash flow problems and make plans to minimise their negative impacts.
5. Have a Line of Credit
Rather than trying to urgently get a loan to cover short-term needs and emergencies, having a line of credit in place can be a much more efficient (and less stressful) way to successfully manage your cash flow. Do your research, as rates are competitive. A line of credit also offers the advantage that you need only draw from it when you need it and pay interest only on the amount that you have borrowed.
Strong, healthy cash flow is vitally important to your business and it’s important to take steps to ensure that you have adequate cash flow and the funds needed to cover your expenses.