Fifteen Ways To Improve Your Cash Flow

Did you know that more businesses fail for lack of cash flow than for want of profit? The root cause is simple - you assume the cost of goods or services in advance of receiving payments from customers. The solution, while not quite as straightforward, is achievable with a little effort. Here are our top suggestions:
1. Invoice More Frequently
If you sell products, mail the invoice the same day the product ships. And if you are a service-based business, bill your clients twice a month or once a week instead of monthly.
2. Request Deposits or Multiple Stage Payments
For large orders or engagements, it is reasonable to request an up-front deposit of up to 50 percent. Cover costs before fulfilling the order.
3. Offer payment discounts for timely payments
Encourage customers to pay early or on time by offering a discount for prompt payment. Even a small discount can motivate faster payment.
4. Check Credit References
Create procedures to check credit before giving terms and make sure they are followed. Get e-mail addresses with credit references. It is easy to send the references an e-mail, in template form, with the credit questions you need answered.
5. Generate Receivable and Aging Reports
Regularly graph your total receivables and past due amounts over time so you understand your cash flow trends. This can help you identify potential cash shortfalls and take early action.
6. Add Late Payment Charges
Like early payment discounts, late payment charges can motivate your customers to pay promptly. Send account statements at least once a month if your terms are net 30, more frequently if your terms are shorter. Include the late charge information prominently on your invoices and statements.
7. Generate Mid-Month Payment Reminders
Generate e-mail reminders based on criteria within your Sage MAS 90 ERP database. Use the Business Alerts module to make it automatic.
8. Accept Credit Card Payments and Deposits
Your customers may be having cash flow problem - accepting credit card payments gives them relief while allowing you to collect on time. Encourage credit card payments for deposits as well. In this way, you'll have the cash right away to begin working on the order.
9. Adjust Your Prices
As the cost of doing business increases through rising fuel, labor, and insurance costs, be sure your prices keep pace. Smaller, more frequent increases are easier for customers to accept.
10. Charge For Items That You Now Give Away
Do you go out of your way to process rush orders, but fail to charge extra for the service? What about local delivery services? Does your service-based company too often not bother to bill for a five-minute phone call? Think about what other services you are currently giving away for which you could charge fees.
11. Add Handling Charge to Freight Charge
The cost of labor and packing supplies is significant. Consider adding a handling charge to actual freight to cover these costs.
12. Reduce Inventory/Streamline Product Lines
Excess or obsolete inventory adds a heavy burden to your costs. Can excess inventory be returned to the vendor? Could you reduce the number of SKUs by eliminating low volume or similar items?
13. Negotiate Discount/Extended Terms
Suppliers who value your business will often be willing to offer special terms, especially for larger orders, giving you time to collect balances from your customers.
14. Renegotiate Bank Service Charges
Bank charges and transaction fees can really add up. If you do all your banking with one institution, or hold assets such as certificates of deposit with your bank, your bank may be willing to waive checking account and other service fees.
15. Consolidate Debt
If you have several loans related to your business, such as a car loan, an equipment loan, and a business line of credit, review the rates and terms. You may be able to consolidate them into a single lower-interest account.

    Which of these fifteen items has potential to improve cash flow in your business? Your Sage MAS 90 software contains the tools and features to help you implement many of these improvements. Call us to discuss further how we can help with implementing.