Many businesses suffer from cash flow problems. Without sufficient cash flow, a business is severely crippled. Finding a solution to the problem can vary depending on the nature of the business. However, there are a number of general tips that can help solve cash flow problems. Mecham Dicus & Company would like to share tips that can help solve cash flow problems and ensure the success of your business.
Never Delay Invoicing Customers
Delayed invoices can cost a business thousands of dollars each year. Many businesses will put invoicing on a schedule. However, this is a mistake that is commonly made. Some businesses are so busy many of them schedule monthly invoicing which doesn’t sound that bad. When it comes to having a healthy cash flow, monthly invoicing can be more hurtful than helpful. For those who provide products or services, once those services or products are delivered, you should send an invoice immediately. By invoicing you will better manage your business cash flow and prevent lost revenue for the business.
Schedule Shorter Payment Terms
One common cash flow problem for businesses is that the business may have been too generous with payment terms. Most common in newer business, they are at times eager to have clients sign up for their services. The inexperienced business owner doesn’t always realize that generous payment terms are actually hurting the business cash flow. For smaller businesses, it is recommended to give no longer than a 2 week payment term. However, smaller businesses can survive with a 30 day payment term if necessary. For larger businesses they can have payment terms between 45 to 60 days. To ensure your business stays afloat, never permit long payment terms as you need the money flowing into the business.
Retainer Invoice Terms
When you need to see quick improvement to your business cash flow, one should do retainers. A retainer is a term that is used when the business will be paid the same amount on a regular basis. A retainer term can eliminate cash flow problems completely. You don’t need every client on a retainer term as only a few can greatly turn around a business cash flow.
Accept Multiple Payment Options
As not all companies can correct cash flow with retainer terms, another option that may be a better fit is to have a multiple payment option. If you have a client that is having cash flow problems themselves, you can do smaller multiple payments. If a client is paying late, it can affect your invoices and cash flow. To prevent that from happening, see if they can do smaller payments but more frequently.
Follow Up with Overdue Collections
When you have a notice becoming overdue don’t neglect or at least make a note of it. Again, more common for newer businesses, you will want to be on time with your collections. You don’t want to alienate your clients that are overdue on their payment as it is better to have a late payment than no payment. However, you do want to make contact with your client that has collections due. If they take another day or so that might be fine, but you want to make sure you don’t let it slide or they won’t make that payment at all.
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If you find you have cash flow problems, Mecham Dicus & Company hopes the above tips help your business. For more help improving your business cash flow and other accounting services, contact Mecham Dicus Company today.