One of the key characteristics of an efficiently run small business is a steady cash flow. As your business operates on a day to day basis, you incur regular expenses to keep it running. From raw materials, machinery, employee salaries, maintenance, or other inputs, these costs all come together to make up the outflow of cash. This outflow is counterbalanced by an inflow of payments for your company’s products and services, as well as any interest you earn from company investments.
As long as your business maintains a steady balance between inflow and outflow, your company will continue to perform, bringing profits and success in the long run. Unfortunately, life does not always go as smoothly as we plan it to be. When customer payments lag or unexpected massive expenses hit, your business’ cash flow can be thrown out of balance, leaving your business in a sticky situation. Fortunately, there are several things that small business owners can do to help keep their business’ cash flow in proper order.
- Be clear on terms of payment: Before entering into any transaction with a customer or vendor, make sure all terms of payment are discussed in detail. This includes prices, when goods or services will be delivered, by which method payment will be received, dates in which payments will become due, what will happen if payments are late, and the number of days for which you will offer credit. This will help minimize ambiguity and make it easier for you to collect on payments.
- Consider offering discounts: Many small businesses may choose to impose a small penalty for payments that are received after the due date. Instead of penalizing late payments, offer incentives for early payment, such as through discounts. This will not only encourage your customers to pay on time, but it will also increase their likelihood of doing business with you in the future.
- Use payment-tracking software: It can be difficult to manage and keep track of payments from large numbers of customers, especially if they are for different amounts and due on different dates. Computer software can help you manage the accounts of your receivables and give you a clear picture of your business’ current financial standing.
- Have a Plan B: Even the most meticulous income and expense plans can become moot in the event of a cash emergency. Be sure to set aside a small reserve of cash for unexpected expenses. Your reserve should have enough to keep your business afloat for at least 2 to 3 months.
Need Cash Fast? Call Green Ocean Solutions
If your business has encountered a short-term cash flow problem, Green Ocean Solutions is here to help. Our Los Angeles business lending specialists are passionate about helping small businesses grow and succeed and can get your business the cash you need, when you need it. Whether you need cash to fund new equipment or to fund a long-term investment, we can help you get the funding you need in as little as 48 hours. When banks say no, we say yes!
Call us at (888) 997-2179 or fill out an online form today to get started.