Five Strategies to Successfully Manage Your Cash Flow

Maintaining positive cash flow is critical to the long-term success of your business. You need cash to pay rent and salaries, buy supplies, purchase new office equipment or invest in new technology for your company. When you manage your cash flow effectively, you can then position your company to take advantage of opportunities when they arise and experience continuous and sustained growth. Consider these five strategies to help manage your cash flow more effectively:

1. Stay on top of accounts receivable Your goal should be to collect payment from your customers as soon as possible. If you invoice customers, it’s best to state “payment due upon receipt” and consider offering a discount for paying on time (or early). And make it easy for your customers to pay you. Take advantage of automatic payment options, such as ACH and other payment services. Send reminders as needed with a link to easily make any outstanding payments.
2. Be strategic with accounts payable. As you know, it’s imperative to pay your bills on time, so you avoid any issues or late fees. But you don’t have to pay your bills early – unless there’s a discount given to do so. Map out your recurring bills, so you know what you need to bring in each month to break even (or even save some money).
3. Gather a healthy cash reserve. It’s essential to have cash available to pay for unexpected expenses that may arise. And, if you have a seasonal business, this becomes especially important to help pay for regular business expenses when not in season. Most financial experts recommend that business owners save approximately three to six months of savings to cover their costs. Start small and increase your contributions to a savings account regularly.
4. Find ways to maintain an influx of cash. If you work with clients on a contract-basis, clarify all work required and the payment schedule from the beginning of the project. If anything falls outside of the original project scope, revise the contract and payment. Consider offering subscriptions for those who use your products and services regularly, or opt to get a monthly retainer fee for regular work completed. You may also choose to focus on boosting your sales – maybe sponsor a content, implement a referral program or provide a “limited-time-only” special.
5. Control your debt. Too much debt will take away from your cash reserves needed for other purposes. When you do need to borrow money, pay attention to the terms and conditions of the credit offered. Work within your budget to ensure you’re only buying what’s needed when it’s needed. If you can’t afford it, don’t buy it.

The ultimate goal for your business should be to bring in more money than you spend. Positive cash flow gives you the ability to maximize opportunities that arise and build flexibility within your business, leading to a positive bottom line and a more lucrative future. To learn more about ways we can help your business in this area, stop by a branch near you!