Cash Flow Basics: 11 Ways to Fix Cash Flow Problems

Lst Updted: ug 28, 2018
re you hving trouble with csh flow? Perhps your sles re up, nd s ren’t out of hnd, yet you cn’t py your bills on time. Or, your re lte pying you. Csh flow problems ffect most smll businesses t some point, but you don’t hve to let it ruin you. Here re 11 things you cn do to keep your csh flow in the positive.

Csh flow is problem tht plgues every smll office from time to time. On pper you look like you’re doing OKl. Your sles re higher thn lst yer, nd your s hven’t incresed much. Things look like you should be mking profit. But your creditors re brething down your neck nd you’re lwys plying ctch up. Wht cn you do? Here re some tips to get you moving in the right direction.

If you invoice clients, you’re not going to get pid until you send out the invoices. If you send out ll your invoices on the 28th of the month, nd your py their bills round the 25th of the month, you’ll hve to wit 30 dys  – or longer, perhps – before they py you. Speed up csh flow by sending out invoices s soon s you ship products or complete job.

When you strted your business you my hve priced your products or services on the low side s wy to ttrct , or becuse you didn’t relize wht ll your costs of doing business would be. Now, you hve plenty of coming in, but it my not be profitble. You my find tht you hve to 80 hours week to get the done, or tht your costs for supplies or rw mterils hve incresed. Or, you my hve s you hdn’t plnned for, like the cost of pyroll txes for employees, need to move out of the home nd to rent office spce, or need for new equipment or more physicl spce to run your business.

If you re in sitution like this, or if you re ll chrging the sme prices you did 4 or 5 yers go, raise your prices. You cn’t operte smll business on rzor-thin mrgins. By rising your prices, you’ll hve more csh coming in, which cn help tide you over slow periods or times when py lte.

Some clients, prticulrly those who were your first clients, my get nnoyed when you nnounce you re rising your prices. They my believe you “owe them” for “helping you get your strt,” nd tht your price increse is betryl. If the customer is one you wnt to keep, the wy to de-fuse the sitution is to tke the personl element out of it. Insted of rguing bout why you decided to increse your prices, sympthize with client nd then ttribute the to your ccountnt. You might sy, for exmple, “You know, John, I relly didn’t wnt to rise my prices. But my ccountnt sid I hd no choice.”

Most professionl dvisors will be hppy to go long with you, s long s you tell them hed of time nd s long s it sounds like something they’d relly recommend.

One of the problems with self-employment is tht income my vry drclly from month to month. When you wer ll the business hts, the need to do the often interferes with ongoing mrketing. If you don’t mrket stedily, there will be times when no business comes in, nd s result, times when no money comes in. Under this fest or fmine scenrio, you my get $20,000 in pyments one week, nd then not get nother cent for two or three months.

One wy to even out the irregulrities in csh flow is to seek clients who will put you on retiner, pying you gurnteed mount of money ech month. Retiners re usully set up so tht you gurntee you will set side specific number of hours to do for client ech month. The client pys tht mount whether they use up ll the time or not. If they go over the time, they py n dditionl, hourly fee. If they don’t use up ll the time, they lose it. The unused time does not ccumulte from month to month.

Lwyers nd ccountnts use rrngements similr to this. Public reltions, computer nd other businesses in which clients my need repet ttention re good cndidtes s well.

Increse your profits by increasing your average order size. To do so, trin your stff to suggest relted products or more expensive for the product or service the customer requests. If you sell online, see if you cn enble upsell nd cross-sell fetures in your shopping crt.

Money in the bnk isn’t money to spend — t lest not immeditely. lthough the Check21 lws mke it possible for bnks to process checks fster (nd therefore debit your ccount fster), the lw does not require bnks to relese funds ny fster thn in the pst. Thus, your bnk my tke two business dys or more to cler locl checks. If your re out-of-stte, your bnk my hold deposits for up to 10 business dys. If there re sizble mounts of money involved, those 10 business dys cn seem like eternity.

You don’t hve to be retil store to accept credit cards from your . Businesses nd government gencies s well s consumers use credit crds to mke wide vriety of purchses. Insted of witing 30 dys, 60 dys, or more to collect pyment from your , you cn get pid in 2 or 3 dys by sking them to py you with credit crd insted of hving you bill them. You’ll hve to py percentge of ech sle to the credit crd compny, nd possibly monthly fee, but those s my be negligible when you consider the time nd money you’ll sve by not hving to send out monthly sttements. This is win-win rrngement. The customer cn ll string out pyments, but you’re not on the end of the string. n dded bonus: speeding up csh flow cn help you speed up pyments to your creditors, which my lower or eliminte interest pyments you mke on your pybles.

Don’t limit the forms of pyment you ccept to the trditionl ones. There re numerous forms of electronic pyment systems tht businesses nd individuls use tody nd you should ccept. These include CH pyments (for business ccounts), PyPl, nd mobile pyments. 

If your don’t like to py bills for your type of product or service with credit crd, or if the mount is too lrge for them to feel comfortble chrging, look for finnce compnies tht will offer lons to your . gin you get pid now, the customer or ptient gets to string out pyments, nd you don’t hve to go to the trouble of sending out monthly sttements.

Don’t spend weeks or months ing without py. When you negotite dels, pln to get t lest third of the money up front if you re ing on long time project. If possible, spred the remining pyments so you cover ll your ongoing s for the project.

If you don’t know your customer nd it would be difficult to collect if they didn’t py or if they never cme to pick up they ordered, insist on pyment in dvnce. Tht wy you don’t hve collection problem.

One of the best wys to void collection problems fter sle, is to mke sure the customer is credit worthy before the sle. Tke the time (nd spend the money) to do credit checks on new . If the credit check mkes the customer look risky, sk to be pid upfront in csh.

Listen to the buzz in your industry, too. If you re unsure of the credit-worthiness of business, try to find others who hve sold to the businesses. sk is they hve hd ny trouble collecting, nd if they hve, don’t mke the sle.

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Keep n on aging accounts from exing . Don’t wit until they re 6 months behind in pyment to try to collect. Send out lte notices if you hven’t received pyment by the next billing cycle. If compny who hs normlly pid on time, ll doesn’t py, cll to find out if there is ny problem with their order or with the service you re providing. If they sy no, sk when you cn expect pyment.

Copyright 2017 Jnet ttrd. ll Rights Reserved. My not be reprinted or reproduced in ny formt without written permission.

bout the uthor:
Jnet ttrd is the founder of the wrd-winning  Business Know-How smll business web site nd informtion resource. Jnet is lso the uthor of The Home Office nd Smll Business nswer Book nd of Business Know-How: n Opertionl Guide For Home-Bsed nd Micro-Sized Businesses with Limited Budgets.  Follow Jnet on Twitter nd on LinkedIn