Five Ways to Improve Business Cash Flow

One key factor of any successful business is a healthy cash flow. This is especially true for small businesses that are working on limited budgets and need to make sure there is enough money coming into the business to pay for overhead expenses. Here are five different ways you can optimize your business processes to improve your cash flow.

Anticipate Cash Flow Issues Beforehand

The best way to avoid potential cash flow problems is to anticipate them ahead of time and have a plan of action to prevent them from happening. One way to do this is to make sure your clients pay upfront for services. Receiving payment before services are rendered prevents a cash flow disruption caused by late payments from the client. If your company does not take payments upfront for services, be sure to have a written credit policy that includes terms of payment and a fee schedule for late payments.

Optimize Payroll Timing

Payroll is a large expense for many businesses especially for service-based businesses. Service companies don’t sell products, but rather services, and so their expenses include the cost for employees to provide said services. Tweaking your payroll is one way to make sure you have a consistent cash flow. If your company operates on a bi-weekly basis, this means that there are two months out of the year in which there are three payroll periods. Switching to a semi-monthly pay period means that you will consistently be responsible for payroll twice a month for all twelve months.

Streamline your Billing Process

A major disruption in cash flow is extended periods of time in between when you pay your employees and when your clients pay you for their invoices. There may be an opportunity here to streamline your billing process. Instead of billing clients at the end of the month, bill them whenever the job is finished. This opens up more time for you to invoice, bill, and collect from the client while improving your cash flow.

Implement Collections Best Practices

Even though most of us don’t enjoy making collections calls, they need to be done to keep a steady cash flow. Don’t wait until after a customer’s balance is past due to make a collections call. Give them a call five days before the bill needs to be paid. Consider it a courtesy call in which you are providing a friendly reminder that the bill is due soon. This also provides an opportunity to make sure the client has the proper invoices and paperwork needed to pay the bill.

Be Prepared for Objections

Collecting from clients can be a sticky subject. One way to improve your process is to plan ahead for what a client might say in regards to not playing a bill. Create a document that lists the most common excuses for non-payment such as “Your check is in the mail,” or “I didn’t receive an invoice,” and provide answers for each instance. Having responses already prepared can help to improve your collections efforts which will in turn improve your cash flow.

About The Author

GrowthForce (http://growthforce.com) provides growing businesses with cloud-based bookkeeping and controller services, delivering timely and actionable financial intelligence. By leveraging teams and technology and The Cloud, our dedicated U.S. based service professionals optimize and integrate your accounting and financial systems, standardize and automate processes, and perform the daily/weekly/monthly finance functions from our secure hosted environment.