Cash flow is undoubtedly the king of any business but if you’re one of the many companies operating on small margins then easing cash flow could be a top priority.
There are several ways to free up cash and progress your business to the next level. Read our ten tips to ease your cash flow:
Invoice customers promptly, they are more likely to pay quickly if you invoice on time. Dedicate time to complete invoicing or outsource to an external company. It is also vital that all invoices are correct.
- Early payment schemes
Offer an early payment scheme or incentive for customers with discounts for those paying earlier than the agreed invoice date.
- Keep accounts in order
Ensure accounts are accurate, up-to-date and in order. You should have access to debtor books, know your budgets and cash flow forecasts.
- Manage debt levels
Have procedures in place to deal with debt recovery, the longer a debt remains unpaid the longer it will take to collect. Chase unpaid debts the day after they are due.
- Maintain relationships with suppliers
Having a strong relationship with you suppliers means there will be extra flexibility with your arrangements. A good working relationship will enable you to negotiate terms and if needed secure credit arrangements.
- Lease don’t buy
Leasing a commodity such as IT equipment or company vehicles means you pay in smaller instalments rather than a lump sum. It can work out slightly more expensive, but lease payments are often classed as business expenses and part of the VAT claimed back.
- Credit check your customers
It’s always worth running a credit check on new customers, if they flag up as poor credit then you’re likely to be chasing payment down the line. Is the customer worth it?
- Postpone expansion plans
Cash flow problems can occur for businesses looking to expand or grow. By delaying the expansion then cash flow can be preserved for a period of time before re-investigating the expansion.
- Alternative finance
If growth is a priority, aside from the high street route, there are finance companies such as www.v4bprofessions.co.uk which arrange short-term unsecured business loans. These can free-up cash flow and help sustain the growth you want.
- Cut costs
Reducing business costs is straight forward, only spend on necessary purchases, do you need it, and can you afford it? Opt for the lease option if needed.