Managing cash flow, the life blood of a business, is one of the most critical yet under-appreciated challenges faced by many small business owners. Cash flowing regularly into a business is important to buy equipment, pay wages, and keep the lights on and the door open. And often as your business grows, there could be trial and error as you start figuring out your cash rhythms. Sometimes you may have plenty of cash on hand, and at other times, you may be struggling to pay suppliers.
As a result, you can’t always control your cash flow circumstances, so making constant efforts to improve your small business cash flow is your best bet.
So for those of you running a company with its ups and downs, here are some ideas to improve your small business cash flow, ideas you may have neglected in building a cash cushion for your company.
Dispose unused items
Take a good look at your storage units and office locations for items that no one in the company needs access to anymore. There may be excess equipment, materials and inventory, as well as personal items that employees no longer use. It’s time to unload the boat.
You can sell the unused items on the web to other businesses. Cleaning your clutter and lightening the load will net you some cash to get your business through tough spells, and you would be able to better focus on growing your business.
Capture tax credits
Tax credits and incentives are offered by the state, federal and local government to attract or retain investments, conserve the business landscape and simulate innovation. Unfortunately, many small businesses don’t give a thought to these incentives and tax credits and therefore miss out on the benefits associated with them – one of them being improved cash flow due to reduced tax liability.
ADP.com says that there are several job and hiring tax credits and incentives available today. These credits can help offset the costs for your business and lower the effective tax rate it has to pay. However, it can be often difficult to identify and capture these available business incentives. With the assistance of specialized knowledge and proven processes, businesses can take full advantage of and comply with available work opportunity, employment, and other Federal and State Tax credits.
Train customers to make payments on time
When operating a business, your aim is to collect payments for your products or services shortly after delivery. The optimal choice when trying to improve cash flow is to receive COD (cash on delivery), but that may not be possible for all types of companies. In that case, it is a good idea to invoice the customers on the day of delivery with a note that ‘payment is expected on invoice receipt’.
Another thing you should do is stay on top of accounts receivable aging: this is a report that categorizes accounts receivable based on the length of time of outstanding invoices. Try to establish an early contact with payers who may be delinquent and offer a variety of payment alternatives if they face difficulties. These options could be a payment plan or even a future credit card charge. Remember, customers who don’t pay can be an expense to your business.