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Cash Flow for Small Businesses 10 Ways to Ensure Yours Stays Positive

By Harry Turnbull


Starting a small business is difficult enough, but providing it with positive cash flow is even more scrutinizing. When small businesses find themselves experiencing difficulties in this area it can eventually lead to failure. In order to help you get over the hump we have 10 powerful and effective tips that will produce continuous positive cash flow.

Great Customer Relations

Perhaps the most important thing you can do to keep cash flow positive is to develop good customer relations. When customers think of you as both a business partner and a friend, they are more likely to be prompt in paying their bills. They don't want to sour the relationship any more than you do, so they will give priority to your invoice.

2. Be Flexible with Customers

If by chance they run into a cash flow issue and you have built a trusted relationship; cut them some slack. Just by extended their payment deadline can help them get back on track and even provide you with more referrals. In the end this will help you grow your business as long as they don't take advantage of your generosity.

3. Proper Invoicing

Invoicing provides a way for business owners to keep their customers in check. It also creates a sense of urgency for them to pay on time. Even when it comes to vendors who don't keep their own bookkeeping and invoicing paperwork well, your proper invoicing will virtually make them want to pay you. Without a good invoicing system you will surely fail.

4. Proactive Accounts Receivables

It's very important to be proactive when it comes to debt collection. Just by making a simple phone call to a customer that is behind on his or her bill will normally do the trick. It's a gentle reminder of the balance due, which can be used in a way where it doesn't damage the overall relationship. If you let a past-due balance linger then the resentment will begin to build. The customer will being to experience fear of you calling, which turns into a recipe for disaster.

Purchase Ledger Management

It's not uncommon for vendors and customers to also play opposite roles with one another. In terms of accounts payables, you need to be prompt in settling your invoices on or before their due dates. If you pay your bills, your customers are more likely to do the same.

Petty Cash Expenditure

While petty cash can be handy at times, it also leaves temptation on the table when it comes to purchasing things for your business. In most cases these are impulse buys instead of things the business needs. Plus you will have a harder time keeping track of your expenditures along the way. It becomes a nickel-and-dime process, so keep your petty cash account to a minimum.

Expenses and Credit Cards

We could also lump these into your petty cash woes as well. The temptation here is extremely hard, and it gives you two ways to spend, spend, and spend. If you have company credit cards and an expense account; we highly recommend monitoring it closely and created a firm set of policies. This will also include verifying all transactions as well.

Assess New Customers

Considering carefully the payment terms for new customers is critical. If you are engaging new customers with whom you plan a long-term relationship, a credit check may be in order. Any customers who you suspect to be a credit risk should always pay cash or be kept on a short credit leash.

Overheads and Business Slowdown

Overhead is one of the largest expenditure categories most small businesses face. Overhead includes things like office equipment, tools and supplies, rental payments, excess inventory, and so on. Avoid unnecessary expenditures on things that are considered overhead but not vital to your day-to-day operations.

Shrinkage is basically an issue where money is coming directly out-of-pocket. Whether it's accidental damage, poor quality in a product, or even a theft problem; each of them should be considered. We recommend having better inventory control and possibly a theft prevention system to keep your shrinkage to a minimum.

Room for Savings

Although it's very rarely talked about in the business world, savings are just as beneficial to small businesses as they are to individual consumers. A cash reserve account is a good way to ensure positive cash flow during downturns. Reserve cash will also help you meet your obligations if you should have several big clients who fall behind on their payments.




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