Is there anything more important than money in business? The answer is a firm no. The amount of cash your business has will dictate a lot of things, such as if you succeed or fail. Cash flow is that essential. Period. For obvious reasons, a business must make sure that the cash flow doesn’t decline or else there will be huge problems. Unfortunately, it isn’t as easy as it seems. Otherwise, companies would never go out of business. At the minute, eight out of ten startups fail within the first year, so it clearly isn’t a cinch.
The good news is that it is impossible as long as you follow a few simple rules. With the help of the following, the revenue streams will flow for the foreseeable future. In fact, they might overflow, but that’s a different problem for a different day.
Request Payment Beforehand
A mistake that lots of companies make is to allow their clients to pay later. In other words, they put a massive amount of trust in their customers. Although it might seem like a good option, it’s a bad move nine times out of ten. Yes, it does allow people a certain amount of flexibility. And yes, it will impress current and potential clients. On the other hand, it puts the firm’s liquidity at risk because businesses will always owe you money. Sorry to be the bearer of bad news, but you shouldn’t trust external companies. Even if they pay in the end, they will take their sweet time. All the while, the creditors could be on your back, and you might experience fines. These penalties are unnecessary if you get the money upfront. Would you allow a customer to pay afterwards? Of course not – it’s an absurd question.
Half Now, Half Later
The problem with asking for all the money upfront is leverage. If your clients pay before delivery, they have to trust that you are a person of your word. It isn’t a secret that they don’t have as much faith in your abilities as you do in theirs. The result is a standoff. However, there is a solution which will suit both parties. Tell them that you are willing to take half of the payment now and the rest on delivery of the product/service. That way, you get to ensure that the firm’s liquidity doesn’t take a hit, and they still have leverage should anything go wrong. The tactic is an age old one which has been around for years. Still, it’s as effective as any when two parties are at a stalemate.
Deposit Payments ASAP
Congratulations – you finally got paid! Now, all you have to do is deposit the money. Wait a minute – you’re not going to go to the bank straight away? Why not?! This scenario might not seem familiar to you, which is good, but it will to a lot of companies. After all the hassle of chasing up debts, businesses don’t deposit the money as soon as possible. The reason this is a major mistake is two-fold. For starters, there is a chance that they money will go missing. If a client pays by check, you could lose the check if you leave it lying around the office. More importantly, it could lead to fines and penalties by the bank. Banks fine customers when they don’t have enough cash in their account. If you’re one of these customers, it’s crucial that you pay them back quickly. Otherwise, the penalties will add up and chip away at your cash flow reserves.
Be Punctual
With that in mind, please be punctual when it comes to payments. So many companies miss payments, and it’s such a schoolboy error. Yes, it isn’t easy to keep up with every facet of the business on a daily basis. However, there is no need to cover all the bases. As the boss, you only need to bother with the important stuff, like paying the firm’s debts. Plus, there are ways to make sure you never miss a beat without remembering various dates and amounts. The trick is to pay by direct debit. In layman’s terms, the creditor takes the money remotely on the same day every month. With this technique, there is no need for you to fret as you can let the debit take care of business. Of course, you need to make sure that there is enough money in the account on a monthly basis. But, that isn’t a problem if you set up monthly alerts on your phone. It’s such a simple process, but it will save the company a small fortune.
Be Shrewd With Credit Cards
There is no doubt that a credit card is an excellent source of finance. But, a card often scares off businesses due to the disadvantages. Yes, there is a chance that they can get you into more trouble if you use them poorly. However, they are a great way to keep the money flowing if you get it right. The reason they are effective is that they prevent you from spending cash. When you use a card, there is no need to use up the company’s cash flow. Instead, you can use the creditor’s money and keep the money in the bank. If you’re running low on funds, or the lender has a promotion, a card can come in handy. If you’re still scared, you can take a look at this guide. With these tips, there is no need ever to misuse a credit card as long as you resist the temptation.
Talk To A Lender
All of the above are excellent methods if the business isn’t struggling. If the firm does start to struggle, you’ll need a large and quick injection of cash. Most of you will think that’s not a problem because you can go to the bank. Good idea because the banks are the biggest providers of business loans on the planet. Well, it’s a good option as long as you are eligible. Not to burst your bubble, but your credit might exclude you from a bank loan. The even worse news is that you might not be aware until you apply. So, what are your options? The first is to find an organization that doesn’t follow the same procedures as a bank. For those that don’t think these institutes exist, visit Business Factors & Finance for more as you might get a shock. The second option is to rebuild your credit score. Yes it is possible, yet it will take a lot of hard work and energy. Tips range from repaying debts, starting with the highest interest rates, to using a secured credit card. None them are fast and trouble-free, but they are effective.
Find Continuity Sales
What are continuity sales? In simple terms, they are products or services that customers pay for on a constant basis. On the face of it, these sales don’t seem possible. After all, a consumer won’t pay for an item twice if there is no need. They aren’t stupid. The thing is there is often a need for them to repay. Take a dating site as an example. The way these sites work is that they renew the subscription every month. For all intents and purposes, their entire business model is a continuity sale. Sure, you’re not a dating site, but that doesn’t mean there isn’t the same potential. Accountants, for example, can keep customers on the books by providing regular reconciliation. Lots of businesses and individuals worry about their finances. In fact, some of them can’t get them off their mind. As a result, they won’t think twice about asking a professional to reconcile the books throughout the year. The key is to provide a service which adds value or appeases their fears.
Invest
Great news – you took the advice on board, and now you have excess cash! But, now isn’t the time for pats on the back and congratulatory handshakes. It’s the time to make an investment because you have an opportunity to secure your finances for the long-term. The way to do it is to make an investment with the overflow. Okay, so this tactic seems like a risky one. However, the truth is that it is quite safe as long as treat it with respect. For instance, you might want to invest in real estate or stocks and shares. If so, it’s imperative to talk to a manager of property or a hedge fund manager. With their expertise and experience, you can avoid the common pitfalls of both investments. In the end, though, you need the guts to pull the trigger. You can let the money sit in the bank and accrue interest, but the return won’t be high. Sometimes taking a gamble is better than being conservative.
Cash flow will always be an issue, even if you think you’re safe. Thanks to the above, there is no need to worry. As long as you keep them in mind, you should always be able to find an effective solution.