Small Businesses: Tips for Improving Your Cash Flow
If you are currently managing a small business, then I am sure that you are always looking for better ways to manage your finances, particularly your cashflow. This article provides some tips on how you can improve your cashflow in terms of managing suppliers, customers, inventory, and forecasting.
Managing Suppliers
When it comes to dealing with your suppliers, the number one tip is to pay them on time as much as possible. If the situation allows, you could also ask them for credit terms, which basically provides an interest-free loan for your business. Likewise, do not hesitate to ask for a discount or a good deal, especially if you order in bulk or make your payments early. In case you are not able to make a payment on time, communicate with your supplier as early as possible in order to set a formal agreement about the matter. Generally, the main purpose here is to maintain a good relationship with your suppliers.
Managing Customers
The secret to effective customer management is good communication. Whenever you have a new customer, always make sure that the payment terms are clear to them, and that your banking information is stated on your invoices. It is also a good idea to conduct a credit check on new customers, just to be sure that you do not run into any problems. In cases of large transactions, do not hesitate to ask for a deposit or set up a progressive payment schedule with your customers. Meanwhile, if you come across non-paying customers, the best thing that you can do is to offer them a payment plan that will eventually clear their debt. More importantly, regardless of the type of of customer that you are dealing with — be friendly.
Managing Inventory
In terms of inventory management, the two things that you need to watch is your profit margin and stock turnaround. Take a look at your products, identify which ones are making the most profit, and focus your time and investments on those items. Similarly, identify which products are “slow-moving” and come up with a plan on how to move them out as fast as possible. The money that you make from moving out these obsolete stock can eventually be used to invest on your more popular products.
Forecasting Your Cashflow
When it comes to forecasting your cashflow, what you can do is to search for a simple forecasting template and learn how to use it. By doing so, you can analyze your sales as well as identify patterns on when sales are at their highest and lowest.
By considering the ways in which you manage your suppliers, customers, and inventory; plus by learning how to do some basic forecasting — you will find that your cashflow will eventually improve in the long run.
About the Author Peter Broberg
Peter Broberg is a bookkeeping professional with over 20 years experience in the finance sector. With more than 2 decades of experience, Peter provides payroll and bookkeeping services on a professional level. His services cater to small and medium enterprises in Cannington, Kalamunda.