Steady cash flow is a common issue in small businesses. While initial capital is vital to starting a business, it is just as important to maintain an influx of funds. There are several strategies you can utilize as a business owner and operator that can help fix cash flow problems. With clients and behind the scenes with vendors, you can carry your business through tough times by making sound billing decisions.
One of the biggest problems that can affect cash flow is receiving timely payment from customers. The best way to avoid a repeating pattern of clients taking too long to pay bills in full is to set clear expectations. Be sure to let your customers know what kind of payment structure they’ll need to comply with and stick to your guns.
Control of Product
A great way to help support cash flow and ensure timely payments is to retain control of customers’ finished product until most or the entire bill is paid. Trust can be extended to repeat clients with solid payment histories but you should still make sure you have any remaining balances in writing.
Installment Plans
An effective expectation you as a business owner can set to help fix cash flow problems is an installment plan. Provide clients with a payment structure that breaks down how much is to be paid for each step in the services being offered. Customers make an initial down-payment and then incremental payments until the work is completed and delivered.
Early Payment Discount
To give clients an incentive to pay bills in a shorter time frame you can offer special early payment discounts. A small percentage of the final amount due can be deducted from a customer’s bill. This can solve cash flow issues by giving customers a good reason to make payments quicker. For example, if a customer made their final payment a week before their due date, 3% of the bill can be discounted.
Vendor Expenses
Aside from making sure clients make time payments, cash flow problems can be addressed by making sure you’re spending as little as possible on third party expenses like vendors and freelancers. If monthly and quarterly business expenses are leaving your business crunched for cash, consider renegotiating with freelancers and vendors.
Cash flow problems can be fixed through the establishment of clear payment policies and an effective negotiation of third party expenses. Communicate effectively with customers, create a payment structure and intermittently renegotiate with vendors.
Danny often writes articles on how to start a small business. He currently works for a company that specializes in invoice factoring. He provides an asset based loan program that can offers short-term financing for all types of companies.
