The foundation of smart business management is maintaining liquidity. If you run a small business and find yourself dealing with restricted cash flow on a regular basis, it’s time to review some basic steps to get things moving again.
1. Invoice immediately
As soon as the job’s complete, send the bill. Consider asking for upfront deposits or partial payments if your business undertakes long, complicated and/or expensive projects.
2. Incentivize prompt payments
Make it clear when payments are due and offer a small discount for quick payments. For example, 2 percent off if paid within 14 days.
3. Pay bills when due
Don’t pay your own bills sooner than required. Check when bills are due and schedule payments accordingly to keep your cash on hand for as long as possible.
4. Check your customers’ credit
Don’t risk taking on clients who have a long history of making late payments (or not making payments at all). Be proactive in conducting credit checks so you can feel confident your clients will pay you in a timely fashion.
5. Evaluate your inventory regularly
It costs money to store products that aren’t selling – and it can also cost you to not have the products readily available that your customers want. Analyze inventory and purchase trends regularly so you can meet demand (without undue surplus).
6. Cooperate with similar companies
Obviously, you probably don’t want to partner with direct competitors. But if you can find similar companies who use some of the same supplies as you (but ultimately sell different products), consider asking them to make combined purchases from suppliers. That way, you’ll both benefit from bulk pricing.
Click here or visit your local branch to learn more about how Monterra Credit Union’s Commercial Services help business owners succeed.
