How to achieve a healthy CashFlow!
a Collaboration from Amy Collett.
Cash flow has been a problem for 60% of small business owners. Proactively working on business cash flow reduces the stress of being a business owner and makes it easier to stay current on your bills while your company grows. Try these healthy cash flow strategies.
Encourage Early Payment
Send invoices to clients immediately, and create terms that encourage them to pay quickly. Establish your payment terms, such as net 15 or 30, which means the payment is due 15 or 30 days after the invoice date. Consider offering a slight discount when customers pay in advance or before the due date. This keeps money flowing into your business without long waits for the money you're owed.
Increasing your prices slightly could also be a solution. Review your pricing strategy to ensure you're not underpriced. Research the market and test new pricing points to bump up your pricing without going too high.
A Lease of Life on Payments
Look at the terms on the bills you owe to lower your costs. Paying early could give you a discount or save on interest. Some creditors and vendors might give you a small discount if you set up automatic payments. Avoid late payments, which often result in late fees and interest.
A study from the Equipment Leasing and Finance Foundation shows that 79% of people used some type of financing, such as leasing, loans, or lines of credit, to get new equipment or software. Leasing often costs more overall because the payments total more than you would pay to buy the item outright. However, the smaller monthly payments keep your cash flow high.
Manage Inventory Properly
Too much inventory that doesn't move quickly ties up cash. This can hurt your cash flow. If you have inventory that's not moving, consider discounting it to free up some of the cash. Improve inventory management to keep just enough inventory on hand.
Record Finances Accurately
Accurate financial records let you monitor incoming and outgoing cash effectively to prevent cash flow issues. Accurate, timely records give you a real-time view of your cash, so you can make better financial decisions. It helps you avoid late payments and helps you spot customers who are past-due, so you can collect.
In addition, monitoring software lets you track your cash flow in real-time and forecast upcoming cash flow. This information can help you avoid issues and help you make smart financial decisions based on the current and expected cash flow. Find out how Galena Solutions can help.
Cost-cutting strategies to free up cash include reducing office waste, going paperless, using electronic options, and shopping around for cheaper materials and services. Ask employees for suggestions on streamlining their jobs to save money.
Form an LLC
Some benefits of forming an LLC include protecting your personal liability, growth potential, and tax advantages. By maximizing your tax deductions and protecting your personal finances from litigation, you improve your financial situation. How do you start an LLC? Check the rules for forming an LLC in your state since they vary.
Maintain a Healthy Cash Flow
Healthy cash flow makes it easier to run your business successfully without constant shuffling or more borrowing. Explore the accounting solutions available from Galena Solutions to ensure accuracy and identify cash flow issues.