Maintaining a healthy bank account is top of mind with every small business owner. How can you improve your cash flow and reduce common money management headaches as well? The below tips will help you stay ahead:
1. Invoice regularly – Be direct with your customers about your billing terms – whether it’s a deposit upfront, invoicing based on percentage of work complete, or immediately after completion of a project. Timely billing will help you maintain a more consistent cash flow.
2. Reward prompt payment – Rewarding customers who pay quickly is a great way to keep the cash coming in. Even a relatively small reward, such as a 1-2 percent discount for customers who pay within the first ten days, is usually enough of an enticement to get the ball rolling.
3. Enforce credit checks – Knowing that your clients are capable of paying you is key to keeping a steady influx of cash. Don’t give credit to or work with those who aren’t qualified.
4. Invest excess cash – Don’t let large sums of cash sit in your business cheque account. When your business has excess cash – invest it. Savings accounts, money market accounts, and term deposits are all great financial options to keep that cash working for you.
5. Set a budget – And stick to it. A budget will help you to forecast the future of your business as well as assist you in maintaining the best schedule for paying bills.
6. Take your time – An important aspect of maintaining a positive cash flow is to hold onto your money as long as possible. Pay all bills on time so as not to incur late fees, but take advantage of longer payment periods and don’t pay too far in advance.
7. Raise your prices – A simple solution that is often overlooked. If you find it difficult to pay bills regularly or if you haven’t raised prices in the last five years, consider raising them. Benchmark your pricing against your competitors and see if you can afford to raise your rates. You cannot stay in business if you don’t make a profit.
8. Prepare plan B – Set up a line of credit with your bank to cover your business expenses in an emergency.
9. Avoid excess inventory – Although many vendors offer discounts for bulk purchases, excess inventory ties up your money. Manage your inventory closely and you can free up cash.
10. Be efficient – The faster you deliver your product or service the quicker you get paid. Examine your business model/supply chain closely and look for ways to cut out wasted time. Unnecessary delays disrupt your cash flow.
For more information visit www.citibank.com.au/smallbusiness
– James Balagot is the head of business segment, Citibank Australia.
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