Maintaining a positive cash flow all year is a technique that many business owners learn through trial and error. Managing the cash coming into your business is just as important as managing the cash going out of your business. With more cash coming in, your business is stronger – profits increase, lenders look at you more favorably and applicants seek out your business. Here are five things that you can implement that can help you improve your flow of cash.
If you are not already receiving detailed reports regarding the movement of your cash, speak with your bookkeeping department. They should provide you with monthly statements that detail the cash gained or spent from operations, financing and investments. With these reports, you see patterns in your income and spending. Once those patterns are identified, you can develop strategies to improve your cash.
Now that you are receiving your cash flow statements, analyze them to determine when and where your cash is moving. Monitor your investments to maintain a balanced portfolio. Should some investments significantly decline, the loss should be offset by other successful investments.
Review your operational procedures to identify patterns in expenses. Proper maintenance of equipment is critical to keep your cash moving. If you see a need for additional operating capital, start working with a lender when your business has more cash on hand.
Ask customers to use e-payments instead of checks. Money transferred this way gets moved into your account faster than having to wait for a check to clear. The cost of accepting bad checks can damage your profitability.
Use interest-bearing bank accounts to increase your incoming cash. Even though many of these interest payments are small, strategically moving your funds from one account to another can help you access this free money.
Use Credit Cards
Credit cards give you a 30-day revolving line of credit at no cost to you. Be sure to pay the entire balance and avoid interest payments. Many credit card companies offer zero or low-interest promotions. Make strategic use of these times to acquire new equipment or supplies. Be sure you understand the terms of the program to avoid interest penalties.
Business owners that understand the importance of monitoring their cash show an increased incidence of long-term success. Taking the time now to integrate these policies can help you maintain a positive cash flow, even during slow seasons.