Strategies for Improving your Cash Flow Management
There's an old adage in business that "cash is king" and, it’s still true in the 21st Century. Cash flow is a critical ingredient in the success of any business, no matter the size, because without cash profits are meaningless. We’ve seen the demise of many profitable businesses on paper because the amount of cash coming in doesn't compare with the amount of cash going out.
Firms that don't exercise good cash management may not be able to make the investments needed to compete, or they may have to pay more to borrow money to function. Most entrepreneurs will regard growth as the solution to a cash flow problem and they will often achieve the goal of growth only to find they have increased their cash flow problems in the process. It is important to plan for growth and the related cash outlays in advance, so that it does not come as a surprise.
Our DiscountDesk growth experts offer advice on how business owners can take practical steps to better manage cash flow, especially for a growing business:
Improve Your Invoicing & Collections
The faster your clients pay you pay you, the more time you have to manage your own cash levels. Be sure to invoice clients immediately after you have provided the service or product or build in discounts that can be offered for early payment. Be sure to specify payment deadlines in your service agreement to avoid unnecessary stress and delays.
Tighten Your Credit Requirments
Many businesses use the option of extending credit to customers, particularly when starting out or growing. It is important that you comply with credit regulations in South Africa and that, depending on the terms you offer, that you register as a credit provider. Do your research carefully to determine the risk of extending credit to each customer. Another option to extending conventional credit is to accept credit cards. This will obviously cost you a percentage, depending on the credit facilitator (i.e. VISA, MasterCard etc.), but it may be a good option for getting paid on time.
Increase Your Sales
New customer acquisition is essential to a growing business, but it takes time and money to convert prospects into sales. Selling more to existing customers is cheaper and you may be able to do this by reviewing what they are buying from you and why - information that may even lead you to hopefully generate more cash. Just be careful when increasing sales that you’re not just raising your accounts receivables rather than actual cash if the sales are on credit.
Make use of Invoice Discounting
Sometimes you just don't have all the control over when you are getting paid by your clients that you have invoiced. This could lead to being the main contributor to your cash flow problems.
But, you can make use of Invoice Discounting to fix this cash flow problem through DiscountDesk. By selling your unpaid invoices to us at a discounted rate will provide you with instant cash that can be allocated to expenses that your business are facing that needs to get paid immediately.
To find out more about Invoice Discounting a.k.a Invoice Factoring contact our specialists directly.
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