How to strengthen cash flow

How to strengthen cash flow

Cash has always been the life blood for any business to run smoothly. If you strengthen your business cash flow your business runs very effectively and vice versa. Cash flow is all about managing money in smart and effective ways. Its more of getting in more cash in the business and spending less cash.

One of the most important factor is not just increasing the cash inflow but limiting the cash outflow.

Send invoices right away

Sales invoices are the life blood of any business. you can’t paid if you don’t send out invoices to your clients. You have to make sure that you send out invoices to your customers without fail and any delay. The quicker you send out invoices, the faster cash comes into your business.

Get your clients to pay invoices in time

Make sure to remind your customers when their invoices are due. Sending them a reminder few days before the invoice is due, on the day invoice is due and few days after. Giving your customers incentives helps you to get your invoices paid well in advance. e.g. offering discounts to the customer who pay their invoices before time always help you to increase the amount of cash flow within your business.

Another great factor is way to increase the cash flow is to have a strong invoicing policy. Choosing a consistent time e.g. due upon receipt net-15, net-24 etc. will help you to manage your cash flow in timely manner. Also you can implement late fee or penalty for getting your money late. For this you have to specific to the point as how much late fees will apply and when.

Reevaluate operating expenses

Cash flow management is all about getting more cash into your business and reduce the cash outflow as much as possible. Reevaluating operating expenses will help you to analyze unnecessary expenses if there are any so you can control the expenses. Carefully consider your current expenses and check. If it is necessary to do the expense, find a cheaper alternative for the same.

Another way is to make sure that your business processes are streamlined and is running as efficiently as possible. Focus on cutting the time and not just costs. Try to improve the current process by way of improving the speed and efficiency.

Liquidate old inventory

When you have pilled up old inventory, it will just block your cash. Try to find a way by which you can get rid of the old inventory so you can generate cash out of it. Also make sure that you buy is actually getting sold. Take a look at your sales pattern to see your busy and non-busy sales times so it will help you to manage your inventory accordingly.

Payment to your suppliers

Be strategic and consistent while paying your suppliers. If your supplier is giving you a discount for paying early, make sure you take the advantage of it and can save some money. If your supplier doesn’t offer a discount, pay them when its favorable to your business.

Check if some of your suppliers have got excess inventories and are willing to offer you a better deal. This will help you to acquire inventory at a cheaper rate and help you to save more money.

Keep another funding option ready

Another option to increase the cash flow is to take out a short term loan or line of credit. Keep this option ready for emergency situation. It is a good cash flow option available, however, it should be used wisely as the interest paid on the loan might be expensive sometimes.

Conclusion

All of theses tricks will help you to increase and manage your cash flow in a better way. Whether you decide to focus on improving your sales, reducing your expenses, gaining capital or mixture of all, you are well on your way to increase the cash flow in your business and making it more successful.

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