by Amos Faulkner

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Keeping your business’s cash flow positive gives you more room to respond in case of emergencies or time-sensitive investment opportunities. It gives your business improved creditworthiness, opening up more lines of capital injection if you ever need external funds to grow. More importantly, you’re able to handle crucial expenses, such as utilities and payroll, in a timely manner.

This Your Tax Matters Partner article offers some tips for maintaining your business’s cash flow so it runs efficiently.

Run Credit Checks on Your Prospects

One of the main issues that can affect your cash flow is customers failing to pay invoices on time. That’s why vetting customers and accepting only those with a history of honoring payment deadlines is imperative for maintaining a good cash flow. 

To do this, you can work with multiple credit reporting agencies. For example, in the United States, you can choose from Experian, Equifax, and TransUnion. Alternatively, you can use software with an integrated transaction API to look at a potential client’s transaction history. This can give you some idea of their ability to pay.

Hire a Business Consultant

An experienced outside opinion can make a huge difference if you’re struggling to identify areas for cost reduction internally. Internet job boards offer you the best chance of finding a consultant who meets your budget and has expertise within your industry. You also get a quick overview of varying experience levels, skill sets, and past consulting engagements. 

Hourly costs for consultants vary widely by industry, and you may be quoted a higher fee if you opt for a highly experienced professional. They can offer proven advice on the best strategies to bring more revenue into your business while keeping overhead low. For example, a consultant may advise you to lease equipment instead of buying it.

Motivate Customers to Pay Early

Even after running credit checks as discussed above, you can still take steps to ensure your customers pay you as agreed. One way to do that is to offer incentives such as discounts if they make early payments. This increases the chances that you receive payment immediately after closing deals even if you’re offering net-30 or net-45 payment terms to stay competitive. You can use an invoice generator to run invoices once a week. A well-designed invoice can spell out your discount terms, inviting your customers to remit payment early.

Optimize Your Inventory

If your business sells goods, evaluating how fast you’re shipping each type of product or stock can expose opportunities for improving your cash flow. Goods that spend longer in storage essentially tie up your cash flow. Meanwhile, those in higher demand that ship out fast translate to incoming immediately usable cash in a shorter time frame. 

Negotiate Lower Rates With Your Suppliers

Your suppliers are trying to maximize their cash flows just as you are. If you offer them favorable terms, such as early payment, they may be willing to give you discounts. The less you have to pay, the more liquid capital you retain. That doesn’t just lead to a healthier cash flow; it can contribute to hefty reserves over time. 

Positive Cash Flow Makes for a More Resilient Business

Scaling your small business requires having cash on hand to pay bills on time and capitalize on opportunities for growth. For more information about tax issues for your business, visit Your Tax Matters Partner.

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Amos Faulkner wants to help people “do money well.” Money is a constant in our lives. Yet, as a bank teller, Amos realized that many people don’t pay enough attention to how much they have or how much they need, now and in the future. Well, now, the buck stops with his site, domoneywell.com. From teaching your children how to manage their money to saving for your golden years, Amos will cover it all.