The idea of running a business and maintaining it is a tough job. Many startups lose money because, as good as their ideas might be, they lack proper management. As a business, you might start to run out of money if you’re not keeping track of your cash flow.
Maintaining a good cash flow requires proper financial knowledge and management. And to keep it easier for you, we have shared some practices you can adopt to maintain a steady cash flow for your business.
Don’t worry we’ve kept it very simple and easy to understand.
So, let’s start! 10 Best Practices to Maintain a Steady Cash Flow For Your Business
1. Conduct Customer Credit Check
Make sure to conduct a credit check when a customer offers to purchase through credit instead of cash. If they don’t have a good credit background, it’s more likely they won’t make payments on time, which can put your business into trouble.
To avoid that, you can charge them high interest rates for late payments. It will establish security and won’t affect your cash flow.
2. Send Invoices on Time
Sending invoices on time plays a huge role in your business. It helps establish an understanding between you and your customers. Keep the invoicing timings to Immediate, 15 days, 30 days, and 60 days. Send invoices in a pattern, so your customers don’t forget to pay you.
Include necessary details like due date, late payment charges, etc., clearly in your invoice. If you want to make your invoicing system more efficient, consider signing up for invoicing software.
3. Offer Discounts for Early Payments
Rewarding your customers with a discount when they make an early payment can be a great way to maintain a steady cash flow. It generates new initiatives for business growth, leads to better customer satisfaction, and benefits both you and your customers.
4. Use Electronic Payments
Electronic payments are fast becoming a great way to secure a steady cash flow for your business. It is because electronic transactions are safer, faster, and easier to perform as compared to traditional paper-based payments.
Electronic payments save you a lot of time. Transactions happen more smoothly, and they even include rewards and cashback for your customers.
5. Increase Your Prices
If your customers are satisfied with your products/services and you know you’re offering the best in the market, don’t be afraid to increase your prices.
In the long term, your pricing strategy is just as important as your business plan. Customers will always value you for your quality services/products, and when you offer them that, they will happily pay you the said amount. Moreover, this helps your business serve your customers better by expanding your cash flow.
6. Charge High Interest on Late Payments
For customers who make a late payment, charging a high-interest rate can be a way to keep your business in line. It will ensure a better cash flow.
Charging high interest on late payments has been a source of revenue opportunity for businesses for several years now. It helps a business build up its income significantly.
7. Pay Suppliers Early
Negotiation is an art every business should know. While getting your supplies, ask your supplier if an early payment from your end can get you any discount. Negotiate. Chances are that they will agree to your conditions.
Once that happens, it will help you save more money and maintain cash flow for your business.
8. Improve Your Products/Services
Keep a check on what’s selling and what’s not. Get rid of products that are not making profit, even if you have to sell them at bigger discounts. Produce more products that align with your business goals and maintain cash flow.
9. Keep a Check on What Went Wrong
Pay special attention to your customers who are not satisfied with your products/services. It could be the best way to know where you’re going wrong and can help you improve your business.
Ask your customers what they didn’t like. If they’re still not satisfied, offer them a discount. This way, they will value you more, and it will help establish trust. Therefore, improving your cash flow.
10. Maintain Emergency Funds
Emergency funds act as your savior in bad times. They have the purpose of protecting the business from unknown and unforeseen challenges that could affect its cash flow.
So, creating and maintaining an Emergency Reserve Fund (ERF) for your business is paramount, allowing you to be in control of your financial destiny. The money should be sufficient enough to cover at least three to six months of your expenses.
Cash flow, along with other factors of the business like marketing, customer service, product development, etc., can help your business thrive. Executing these strategies is essential for any business, big or small.
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