April 1, 2020

several Ways to Beat the Small Business Income Crunch

What do 90% of business failures possess in common?

Lack of cash.
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Cash will be king. According to Dun and Bradstreet, 90% of business failures occur because of poor cash flow. In today’s sensitive economy, maintaining a strong positive cash flow for your small business is more important than ever.

Cash Flow Basics for Small Business
Properly, duh, right? Any high school economics student can tell you positive cash flow is important to a small business. But knowing about cash flow and keeping a positive cash flow for your business are 2 different things. So what do you need to consider with regards to your business’ cash flow? Three factors affect cash flow:

– Accounts Receivable (cash flowing into your business)
— Accounts Payable (cash flowing out of your business)
– Overhead Expenses (a subset of accounts payable)

In this article I give you three ways to boost the cash flow into your business.

3 Ways to Increase Cash Flow into Your Business
If you accounts receivable records look good, your company cash flow should be good, right? Incorrect. A positive accounts receivable column only helps your business if you can convert your receivables to cash. Your company accounts receivable is a listing of money owed to your company. But being due and having cash in hand are usually two different things. So how do you switch accounts receivable into cash faster for your small business?

1 . Bill Quickly and Accurately
Another “Duh! ” suggestion, but you might be surprised with how many small business owners are guilty of ignoring regular and prompt billing, viewing it as another paperwork hassle that will goes on the back burner. If your small business doesn’t bill promptly, start now. Assign an employee to handle this task if necessary. When focusing on long-term projects, arrange to costs monthly for work-in-progress and ask for a deposit before you start the project. Also, be very careful and detailed in your billing. Nothing strains a good business relationship like billing errors. Review your bills for errors and omissions prior to sending them out.

2 . Avoid Slow or No-Pay Clients
You could be amazed at the kinds of clients that are slow to pay, or totally delinquent. According to Dun and Bradstreet, the worst slow-pay offenders are huge businesses, those with 500 employees or more. On average, these businesses take 62. seven days to pay up, more than 4 weeks previous normal 30-day terms. Here’s another shocker: the most common no-pay offenders are clients who owe $500 or even less. Apparently, these clients believe that this amount of cash is insignificant, , nor feel guilty about not having to pay up.

Before you take on a new customer or extend credit to a client, do your homework. You can do a credit check upon all new clients using an outside company, or request credit references and do your own checking. Another option would be to call other businesses that do business with your client to learn whether the customer pays on time. If the potential client turns out to be the slow/no pay kind, don’t take them on. In low fat economic times it may seem crazy never to accept all the business you can get, yet clients who don’t pay up can seriously and negatively impact your cash flow. Not only will you wait around endlessly to get paid for goods and services currently delivered, but you will also spend a lot associated with internal resources tracking delinquent accounts and chasing your cash. The best plan is: “Just say no! inch

3. Plan for Fast Cash
You can find two ways to get your clients to pay upward sooner. First, you can negotiate short payment terms when you contract using a client. These days, many small businesses are asking for and getting “net 15? conditions. See which if your clients may be open to these terms. Second, in case you are not comfortable asking for “net 15? conditions, you can offer clients a low cost for early payment. Offer a 1 to 2 percent discount for paying inside 10 days. While you’ll be losing a little cash to the discount, you’re general cash balance will be a lot much healthier.

These three simple strategies for cash flow management can be the difference between your small business operating in the black or becoming one of the business in the 90% failing bracket.

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