For most businesses that give credit to their customers and receive credit from their suppliers cash flow is usually an issue
It is important to keep an eye on your cash flow and the following tips will help you do this
Send invoices on time
Send invoices promptly as delay in sending will give your customer an excuse to delay payment.
Make payment terms clear
Make your payment terms clear and make sure your customers are aware of your payment terms.
Send Invoices and Statements Together
As well as reducing administration, paper and postage it avoids the issue of the customer delaying payment while waiting on statement.
Build up good relationships with Customers and Suppliers
If you have a good relationship with your customers this could make your customer more inclined to pay you quicker. It will also make it easier to confront an issues regarding late payments. The same also goes with your suppliers, if you know you will be paying a bill late then if you have a good relationship it will make it easier to negotiate with your supplier if you are on good terms.
Sometimes it may be beneficial to factor your sales to your bank. The bank will let you draw down a percentage of your daily sales invoices with the balance being paid over when the customer pays. The downside is if the payment terms are exceeded they will claw back the original draw down and they charge a fee for the service they provide.
If you pay your supplier early you may be able to negotiate an early settlement discount which could be anything between 1-20% of the value.
Although you may need to hold stock in order to meet orders it is important that you don’t hold unnecessary stock as it only ties up cash. Additionally there may be other ancillary costs of holding stock such as; rent, heat and light, insurance and security.
Plan ahead for the next 3-6 months and note all your overhead costs and ensure you stick to them. This will discipline you not to be wasteful with costs that can be avoided.