Cash flow is a fundamental indicator of financial health. It is crucial to have a solid understanding of where your money is going, and how much is coming in so that your business can stay afloat. Debt management and consistent cash flow are keys to growth, so it is vital to understand the steps to improving and retaining capital.
It may seem as though cash flows directly out of your business, and not so much back in. But there is a balance, and it is important to strike that fine line to ensure profitability. For small and medium companies in particular, that positive cash flow is critical to success, allowing for progression and sustainability. It’s much more than simply tracking the funds that come in and out; improving cash flow needs to include how your assets can contribute to higher efficiency, better investments, and other initiatives which work together so that the company is performing to its highest level.
Because cash flow is almost impossible to predict, it is also important to appreciate the difference between prediction and projection. By adequately planning for future income in an informed way, it will be possible to pinpoint any problem areas early with your projections, so that you can correct and re-adjust before they become issues.
Here are some simple steps you can take today to improve your cash flow.
Invoice accurately. This seems like an obvious first step in maintaining and improving your cash flow, but it needs to be reiterated. Accuracy to both detail and the precision of the amounts owed are areas which are often riddled with simple errors. Such mistakes can be costly for your business, setting you back in terms of time and occasionally fines. Research finds that approximately 85% of reasons given for non-payment are related to questions about invoices or faulty administration. You must ensure that each of your invoices contain the appropriate and correct amounts, customer information, and addresses.
Invoice immediately. Not only is the importance of accuracy in invoicing stressed, but so is the amount of time between a completed project and when you send an invoice. The faster you invoice, the faster you get paid. By cultivating a small time frame for your invoices, you can rest assured that your customers will have fresh in their mind the amounts that are outstanding, the details about the work completed, and any due dates or late penalty fees. There will be less room for contention when the information is fresh. Accounting software often includes features like email reminder sets: an excellent strategy to gently prompt your clients to pay, and often have features such as links for immediate payment so that you can get paid more quickly than ever before.
Implement some payment terms. Allowing for benefits for early payments is a great strategy to make sure you are getting paid on time. If you can offer your customers a small bonus for paying early, they will be more apt to get those fees paid off. It doesn’t have to be big–a simple 5% discount will work as an incentive to motivate early payment. You can also impose a penalty for late payment, which will also create more motivation in your clients to avoid that loss by paying on time.
Employ marketing strategies. Cash flow means selling whatever services you can. By researching solid and useful marketing techniques, you can increase your profits even more. Marketing tools are widely available on the internet, with a range of educational websites and videos so that you can start learning how to better promote your company and its services to a wider audience. By researching and then taking advantage of seasonal demands, you will have your finger on the pulse so that you can bring in even more cash.
Outsource with online tools. Accounting software is the best method to improve cash flow. With different payment options, lots of features to help save you time and money, secure platforms, and ease of use at the forefront, this is a smart way to improve your profit right away. Invoice Tracker includes customizable email templates and personal email reminder sets for your invoices, to help you get paid faster! Integrate this application with your accounting software to save hours chasing down payments. Seamless payroll is on the horizon! Try our free, 30-day trial, and watch your cash flow expand! No credit card required.