FINANCING & BUDGETING • March 6, 2015
2 minutes Read
Managing a slew of small business expenses when payments from clients are inconsistent or irregular can be tricky. It’s so difficult, in fact, that most small business owners have reported temporary cash flow issues that affected their ability to pay bills on time. Improve your chances of keeping enough cash in the till to cover your assets with the following strategies.
Step 1: Set clear payment terms.
If you don’t establish a time frame in which you expect to be paid, clients won’t pay you within that time. If you expect or need payment within two weeks or 30 days, make that a part of your work contract. To encourage quick payment, you might even consider offering a discount for cash on delivery or payment within 10 days. Most importantly, have a definitive plan of action for late-paying and non-paying customers. If you still have customers that are not paying you on time, know your fast finance options.
Step 2: Look for the tight spots.
All businesses, whether seasonal or not, experience highs and lows in revenue. Many business owners, however, don’t think about these cycles ahead of time and get caught in low-cash situations.
Variable income is not a problem unless it clashes with the variable expenses in your budget. For example, a high-sales month might create a higher inventory bill, which becomes due in the next, low-sales month. If you use those high-sale profits on advertising or hire a new employee, you’ll be unable to pay that inventory bill on time. Just know that you don’t always have to give up advertising or hiring. If you find yourself in a tight spot, CAN Capital has dedicated funding specialists waiting for your call. Find out how much your business could qualify for in just 10 minutes.
Step 3: Find flexibility.
By building flexibility into your business plan, you can prepare for highs and lows in cash flow. Save profits from your high-sales times, and have a plan in place to negotiate with vendors during low-sales times. If you’ve made timely payments on a regular basis, you can ask vendors for variable payment terms and reduced rates or even barter for services. Flexibility with vendors is not always an option, but there is fast, flexible access to working capital. If you’re really stuck, you’ll need to be flexible with regard to expenses, perhaps delaying regular services, downsizing inventory orders, or holding off on hiring.
Step 4: Create a cash flow forecast.
An established business can use its own revenue history as well as industry trends to estimate incoming monthly cash flow. Once you have an idea of the funds that will be coming into your business, estimate outgoing cash for each month. When you forecast a low month for cash flow, make sure you know what financial help is available. Cash flow can seem unpredictable and overwhelming. However, the more you track and pay attention, the more likely you are to avoid a cash flow nightmare.
Since 1998, CAN Capital has been providing small business owners with access to capital to help grow their businesses, and to date have delivered access to over $4.7 billion in working capital across 543 unique industries.
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