Cash flow is extremely important for any business to survive. At its simplicity, you need money to keep coming in so that you can pay your bills on time. Therefore, it is vital to create and maintain practical business practices in order to keep the cash flow flowing.
Invoice, invoice, invoice
We get it. You’re busy wearing many hats with fires to put out. But you can’t get paid if clients don’t have your invoice. The best practice is to invoice daily or by the next day at the absolute latest. If you’re not already sending invoices by email, you should. Invoices sent by mail will only slow the process of you getting paid.
Get paid earlier
Create incentives to get your clients to pay sooner. Perhaps they will get an x percentage discount off their total bill if payment is received within a certain number of days.
Make it easy for clients to pay
Electronic payments will make it super easy for clients to pay you. It also means getting paid faster. When they receive their invoice by email, they should have the option to pay by credit card or debit online with just a few clicks.
Manage inventory
Inventory that is sitting on the shelf is collecting dust and not bringing any money in. Brainstorm creative promotions to drive interest so that you can reduce your inventory on slow moving products. It’s also important to constantly monitor your inventory level so that you are not carrying too many products that are not selling. Consider an inventory tracking system so that you will always be in the know of where you stand with your inventory. Know what is selling and what is not, and adjust your inventory purchases accordingly.
Accounting system
If you’re not using a cloud-based accounting system, it is worth considering. It will allow you to create professional looking invoices and keep track of receivables and payables. You can generate various reports (link to P&L post), which when reviewed, can show signs of potential cash flow woes ahead. Also, many accounting systems have inventory tracking options as well.
Reduce accounts receivable
Keep on top of clients who are overdue or behind on payments. Reminder notices should be sent in a timely manner and escalated should payment remain in arrears.
Insightful Financial Connections can help you move your business to a cloud-based accounting platform. We can also provide monthly bookkeeping services to keep your business on track. Contact us to learn more.