Keep the Cash Flowing and Your Company Growing
I’ve never met a business owner who didn’t want to grow their company. It’s one of the primary reasons for starting a business. You want to make the biggest impact possible—in your industry, within your region, on your customers and certainly on your bank account. However you measure that growth and success, it’s probably the first thing you think about when your feet hit the floor each morning.
You’ve worked too hard to make your business fruitful, and I have a few strategies that will help keep your company’s cash flow in the black.
Ensure your customers are credit-worthy
Don’t wait to invoice
Many business owners think of accounting as a monthly ritual. When the first of the month comes around, they close out the previous month and send invoices for goods and services in one big batch. Here’s the thing, though: If a transaction happened in the first week of a month and you don’t invoice until the first week of the next month, you’ve given your customers three worry-free weeks before they need to think about paying you. That’s good for them, but not great for your cash flow. Instead of batching your invoices, send them as soon as the transaction is complete.
Offer a discount for cash payments
By reducing the cost of goods or services for customers who pay at the time of the transaction, you obviously decrease your profit margin. Then again, you ensure that you make a profit because you’re not waiting around, hoping someone pays their bills.
Ask for discounts or better terms
If cash flow is sometimes problematic for you, there’s a good chance the same is true for your vendors or suppliers. And if you’re offering discounts for prompt payments, why shouldn’t you benefit from the same? Ask your vendors if they’ll negotiate a reduced rate for an annual agreement and/or on-time payments.
Proactively manage your inventory
Maybe you’re a services company and don’t have inventory. Fair enough. If you’re selling goods, though, you undoubtedly have some products that fly off the shelves faster than others. Any product that’s collecting dust on a shelf is tying up cash. Get that cash back into your system by selling stagnant inventory for as much as possible—but discounted as deep as necessary to get cash flowing.
Pay bills electronically
When you don’t need to cut a check and put it in the mail, you have several extra days of positive cash flow. Electronic payments allow you to pay a bill on the day it’s due, and the bill pay feature on ACCESSbank’s online platform makes that easy.
Keep your cash on hand in a savings or money market account
You work hard to grow your business. Let your business return the favor by growing all on its own by keeping reserves in an interest-bearing account.
If you’re seeking advice for cash-flow management, let me know. I can also offer guidance on your other commercial banking needs, including checking and deposits, loans, and lines of credit. Connect with me below.
Mack La Rock
Chief Banking Officer