10 Steps to Mastering Your Company’s Cash Flow

Your company’s fiscal strength hinges upon your current cash flow. Business owners should never feel that they are at the mercy of their customers to generate cash flow. A proactive approach and some strategic planning on the part of business owners can turn a cash poor business into a model of healthy cash flow. Below are 10 strategies for mastering your company’s cash flow.

1) Carefully evaluate new customers before offering payment terms.

This proactive strategy is instrumental in the prevention of fraud and delayed payments. Be sure to check credit references before extending payment terms to customers, especially new businesses lacking an extensive operating history.

2) Make sure your customers know your all accepted modes of payment.

This may sound elementary, but periodically notifying customers of your accepted modes of payment can help you boost your cash flow. Below are three things to remember as you discuss accepted payment modes:

Let customers know if you accept payment by bank wire transfer, virtual check or credit card
Never proactively offer new customers the opportunity to defer payment; payment terms should be negotiated
Using discretion when accepting credit card payments from new customers will help prevent fraud

3) Generate invoices immediately.

Preparing and sending invoices within 24 hours of dispatched goods or services is one of the best steps you can take to expedite payments and stimulate your cash flow. Sending invoices electronically is the fastest, most cost-effective way to send invoices.

4) Focus on your key accounts.

Many businesses have a few key accounts that combine to produce 75% to 80% of the company’s revenue. By remaining in touch with these accounts and keeping their balances current, you will improve your cash flow.

5) Improve your cash flow forecasting.

Advance planning is vital to your ability to strengthen your cash flow. Review your receivables on a regular basis and note any patterns, peaks, and valleys. Highlight your cash flow danger zones and beef up your collection efforts prior toidentified danger zones.

6) Ramp up your collection efforts – especially prior to the holidays.

December is one of the most expensive months of the year for many companies. Businesses need a healthy cash flow to fund Christmas bonuses and pay outstanding bills by the end of the year. Your company can strengthen your cash flow by beginning to collect on outstanding invoices in late October or November.

7) Consider revising payment terms for habitually late customers.

Consistently late payments can have a draining effect on your cash flow, especially if your tardy customers are key accounts. Make sure that you have a policy that addresses failure to remit payment according to specified payment terms.

8) Incentivize customers who pay in advance.

Customers who pay in full at the point of sale deserve to be rewarded. Consider offering a small discount or free products to customers who pay in advance or who have an outstanding payment history. Promote these incentives to new customers in an effort to help them develop good payment practices.

9) Put the company credit card to use.

As long as you pay your card in full every month, you can use your company credit card to help your cash flow in multiple ways. First, you can add a few weeks to your payment remittance. Second, you save time and the expense of purchasing envelopes and postage. Third, you may be eligible for rewards based upon your purchases.

10) Enlist the help of a trusted tax and bookkeeping professional.

One of the best ways to maintain a healthy cash flow is to seek the guidance of an experienced tax and bookkeeping specialist. With 15 years of industry experience, Alexis Gallati has the knowledge and resources to successfully manage your tax and accounting challenges. Please contact us to schedule an appointment to learn how we can generate solutions to help strengthen your company’s cash flow. We look forward to hearing from you!

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