Best Practices to Manage Cash Flow in 2020
Maintaining liquidity can be a challenged for smaller businesses run by experienced decision-makers. When the cash can’t flow properly, the business can’t function properly – and things rapidly deteriorate from there. In much the same way as a lack of oil can cause an engine to grind itself to death, a lack of cash can spell the end of a business.
Managing proper cash flow, therefore, is a skill that every entrepreneur should take seriously. But exactly how can we ensure that cash-flow is kept at a satisfactory level? Let’s take a look.
Getting a Loan
Using debt to finance a profitable venture isn’t just viable – it’s advisable. If you weigh the cost of your lack of liquidity against the cost of securing finance, you may find that the former grossly outweighs the latter. In this case, getting a loan is a sensible move. Modern businesses are spoilt for choice when it comes to lenders; as well as the usual high-street suspects, there’s a wealth of options available online, from lenders regulated by the FCA, but which can be more competitive than their high-street rivals. You’ll even find bad credit business loans, for borrowers who credit history isn’t all that it might be.
Reign in Spending
If you’re engaged in profligate spending, almost by definition, you’ll end up with less cash to play with than you otherwise would have. For this reason it’s important to pro-actively review spending in order to identify potential areas of waste.
Have a procedure to chase up payments
Non-paying clients can put a severe strain on your business’s ability to function – even if there are just a few of them. While it’s often impossible to outright eliminate this problem, you can minimise it by having an effective procedure in place for escalation. That way, you customers will have an incentive to pay promptly, and your staff will know exactly what to do to chase up without having to be told from the top-down.
Make it Easier to Pay
Nowadays, customers expect to be able to pay for the services and goods they need in a variety of ways. PayPal, mobile payments, Debit/Credit cards and BACs are all options – as is cash. The more convenient you make it for customers to pay you, the more willing they will be to do so – and the less time you’ll spend worrying about having to chase up.
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