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Cash flow strategies for small businesses

Apr 30, 2018

By LeeAnn Bruno
Reilly Business Services

A healthy cash flow is crucial for most small businesses, in good economic times as well as bad. Here are a few strategies to help you keep on top of your cash flow:   

Deposits and retainers

A good way to increase your cash flow is to collect a partial payment or a retainer when possible. This gives you positive cash flow every time you start a job.  If you request a retainer or a down payment and the customer balks, this could be a warning sign of cash flow problems for your customer.

Confirm orders and spell out terms in advance

Confirm orders by email, phone or regular mail. Whether your terms are COD, payment in advance, net 10 or net 30, be sure they appear on any and all correspondence, invoices and statements. If everyone knows the “rules,” the expectation is set for on-time payment.

Diversify the methods of payment you’ll accept

Accepting credit and debit cards gets your invoices paid instantly. If a customer orders from you regularly, get permission to automatically charge the customer’s credit card or withdraw the payment from the customer’s bank account. Offer a small discount as an incentive.

Complete the assignment or delivery on time

When you accept an order, send an acknowledgement stating the expected completion or delivery date before you begin the job or order processing. If there are delays in completing an order or assignment, that could impact your customer’s business and increase the likelihood of charge-backs, returns or non-payment.

Send out invoices in a timely manner following completion of an order or assignment

Stay current with your billing. Set aside one morning or afternoon each week to keep a steady flow of invoices going out the door, whether by email or regular mail. The sooner you send an invoice, the sooner you can expect payment. 

Send invoices by email

Ask your customers’ permission to send all invoices by email. Not only does this save on paper and postage, it delivers the invoice faster and starts the payment clock sooner.

Time management

If your assignment is for services provided on an hourly basis, be sure all employees account for their time so you can accumulate these costs and send a complete bill. If the project will extend over several months, send progress bills at least monthly. 

Don’t be afraid to say “no” to someone who already owes you for past due invoices

No one wants to say “no” to potential business, but be careful when you accept an additional order from a client who already is overdue on a previous bill. This practice could make a small customer problem into a much larger problem, for you. You work hard – there’s no reason that you should work for free.

Be flexible and accept payment terms from your clients

Review your accounts receivable outstanding balances and keep in contact with outstanding customers. A series of smaller payments may be easier than the payment of one large outstanding invoice. If you do accept a payment plan, do so in writing, and be sure to enforce the terms.

Establish terms with your vendors

If you usually pay on receipt for goods and services, ask your suppliers and service providers to bill you. Doing so will help even out cash flow by giving you more time to sell the merchandise or collect from your customers before paying your bills.

If you would like to have a discussion about good cash flow practices for your business, please contact us.


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