A Few Ways to Bolster Your Company’s Cash Flow
One of the most important factors necessary for sustained business growth is healthy cash flow. When companies do not manage their cash flow wisely, they often founder and fail. Here are some tips on how to boost your business cash flow, increase bank balances, and keep your company flourishing.
Have Collection Strategies in Place
Late-paying clients are a significant hindrance to cash flow. To avoid slowed growth due to unpaid receivables, have some collection policies in place. For instance, require security deposits of at least 50 percent of the total for large or custom orders. Alternatively, for long contracts arrange for partial payments at various stages of work progression. Offer your clients discounts if they pay early, and penalize late-paying customers by imposing interest penalties. Consider contracting with a collection agency to pursue extremely delinquent accounts.
Cut down costs significantly by purchasing quality used equipment instead of new. Maintain the equipment regularly, and when items break down, attempt to repair them rather than replace them. Don’t be lured into acquiring new fancy technologies if you don’t need them, and delay upgrades of the equipment you already have until they are absolutely necessary.
Sell off obsolete or idle equipment and inventory that does nothing but take up space in storage. When you have cash balances, deposit them in interest-earning accounts until the funds are needed. Delay payments to vendors to the limits of the pay cycles so that the cash works for you as long as possible.
Have Contingency Plans
Sometimes despite diligent management, business cash flow ebbs. In these instances, it’s important to have a contingency plan in place. One option is to establish a line of credit with a financial institution using your accounts receivables or inventory as collateral. Another financing possibility is to arrange for an advance against your accounts receivable with a factoring company.
For more advice on stimulating business cash flow, contact Diamond Commercial Group.