There’s never been a more important time to focus on bringing cash into your business. If you’ve managed to keep your business afloat during these turbulent times, well done! Whether you’re thriving or just surviving, retaining decent cash flow is vital if you’re going to keep your doors (both online or offline) open.
Everyone knows cash is king, as no cash equals no business. Therefore, you need to make cash flow your top priority, especially during these challenging times. To maximise your cash flow, it may be time to return to the basics of good business. Here are some simple ways to maximise the cash flow in your business.
Set out your payment terms and invoice quickly
If your payment terms tend to be too generous, you may need to re-evaluate. Large corporations frequently offer 30-day payment terms, but these could prove disastrous for a small business. A more reasonable timeframe for the average SME would be 14 days, as their cash flow can’t be suspended for that long or diluted over so many weeks.
Now is the perfect time to explain to your customers what your payment terms are and that you need their support. You’ll likely find most people will understand your situation. After all, we’re all in this together.
Once you’ve set (or reset) your payment terms, you need to make sure you invoice as soon as you complete the job. That sounds obvious but it’s surprising how many businesses sit on their invoices for weeks, then wonder why they’re not paid on time.
Sending invoices by email will reach your customer immediately. Make it easy for them to pay by including your online banking details. There’s also no harm in checking in to see if they’ve received the email, so follow up immediately if you haven’t received payment by the due date.
Set a good example to your customers by being prompt with your invoicing. It sets the tone for how you expect the payment to be made—promptly!
Focus on cash-flow rather than profits
Many businesses focus on the singular goal of turning a profit, but they forget that it’s cash flow that keeps the lights on. At the end of the tax year, your accountant may be happy to report that your business has turned a sizable profit, but if you’re struggling to pay bills it’s because there’s no cash in the bank today.
Remember, profit is what’s left after you’ve deducted all the expenditures associated with your core business operations, while cash flow is the amount of money coming in and out of your business at any given time. If you can keep cash in your business, you will remain cash flow positive, meaning you have more money coming in than going out. So, the main difference between profit and cash flow is time.
While profit is still the main goal and most adequately demonstrates the effectiveness of your business model, it doesn’t give you the full picture. You need to also pay attention to your cash flow to keep track of the day-to-day and long-term financial health of your business.
Think about incentives or fixed payment plan
If your business struggles with late payers, you may need to consider alternative payment options. Most people love a bargain, so think about how your business could offer an incentive for loyal customers to complete their payments on time. Just as you save when paying your car registration on time, you could provide a discount for customers who do the same. Customer rewards programs like this will help boost your cash-flow while simultaneously saving you time and money chasing bad debts.
Another incentive to encourage people to pay on time is to offer a gift or something extra next time they do business with you. It depends on your business as to the type of offer. Talk with your team about the types of incentives they’ve been offered for on-time payment. You might be surprised how many good ideas you can pick up just by listening more carefully to those around you.
Fixed-rate payment plans are another viable option. It could work like this; if a client pays for a year’s worth of your services or products upfront, they receive one month free. Your cash flow will get a boost and you can invest that money into growing your business. Your customer is happy as they can pay once, get a great deal, and not have to worry for the rest of the year—a win-win situation!
Use Bartercard to keep cash in your business
Bartercard is an ideal way to conserve the cash flow in your business. It allows you to purchase products and services from thousands of business members throughout New Zealand, Australia, and other countries around the globe, and sell inventory using cash-less transactions.
Keep that precious cash in your business and use trade dollars instead to pay for services such as bookkeeping and accounting, setting up your e-commerce store, printing, advertising, website, graphic design, and SEO.
Imagine how much cash you could preserve if you used trade dollars to buy office equipment and supplies, furniture, collateral, and even wine to serve in your restaurant, or as a gift for clients.
The Bartercard mobile app offers endless ways to maximise cash flow in your business. Contact us today and find out how we can help keep the cash flowing in.