Although having a sizable amount of cash is important to starting a business, it does not matter all that much once business operations have already been underway. For small and medium enterprises (SMEs) in particular, the focus should not be on having a lot of money set aside (although it is a good thing to have regardless), but on maintaining a consistent positive cash flow. Cash flow is, of course, the money that goes into and out of a business, respectively referring to its revenue and expenses.
This positive cash flow – a cash flow in which the business takes in more money than it gives out (or, simply put, profit) – is the ultimate goal for any business, regardless of its size. For larger or older companies, maintaining a solid cash flow is not too difficult, as larger companies tend to have more cash in their reserves in case of financial emergencies, and older companies usually already have a decent reputation and therefore are already making a sizable profit from their operations.
Get in touch with your local debt collectors for more information. Don’t forget to refresh yourself with the debt collection laws so you’ll better understand how to work with debt collectors if and when you contact them.
Doing the same as a smaller company, however, is not as easy, and this is especially the case if your company is fresh on the market since your cash flow for the first few years will be one of the primary factors determining the survival of your business as a whole. Throughout this crucial stage in your growing business, there is a lot at stake. Despite this being the case, you are not powerless to turn the tides in your favor.
In this article, we will be discussing 5 things that you can do to help manage and maximize your cash flow.
1. Plan Ahead
As with any business – or even outside of business in general – one can usually make more informed and overall better decisions with foresight and planning. There are many ways to go about this, but one common example is logging and keeping track of your cash flow through the use of financial management software. By inputting several data points over some time, you will gain a lot of insights regarding your recent cash flow such as your expenditures, your revenue streams, and when they usually hit. Keeping these details in mind will help you to create a better budget plan for your business that adjusts to or even anticipates dips in revenue, allowing your business to continue functioning as normal.
2. Streamline the Payment Process
If you’ve ever installed a piece of software in recent memory, you might remember the incredibly long Terms and Conditions document filled to the brim with technical terms and legal jargon. And unless you are one of the very few people who do, you might remember how you simply ignored the whole thing and never read a single word of it.
In our business context, the same attitude can be displayed by your clients if you present the terms and conditions of your credit repayments in a similarly tedious way. Try to summarize and condense the conditions of your policies into a concise, easy-to-read format, and your clients will be more likely to pay up. Besides that, you can also help your clients pay you back – which, in turn, would help you maintain your cash flow – by opening up more avenues for them to do so.
If your available credit repayment methods are only through bank transfer, try adding options through online banking or PayPal.
Also Read: Top 5 Effortless Cost-Cutting Tips for Small Businesses
3. Have a Solid Debt Collection Plan
As a business owner, you should be aware of the fact that you will encounter a few clients along the way who won’t be able to pay you back according to the terms both of you have agreed upon. That should be a given; this is business, after all. But at the very least, you should at least set some measures in place in anticipation of these sorts of cases; the best way to do that is to form a debt collection plan. You should be able to outline in the credit repayment terms the progressive actions that you will take should the client be unable to repay you on the initially agreed due date. Ideally, you would want to be able to maintain contact with the client until the debt has been repaid in full, and only take action when things don’t go according to the agreed-upon plan.
4. Be Nice
There is no denying that dealing with nonpaying clients can be pretty stressful, but you have to remember that they are still your clients and that the principles of good customer service still apply. A little bit of tact can go a long way here. Before you take any action, try contacting your client first and ask about what might be going wrong. For all we know, they may have simply forgotten to pay you this time. Maintain communication with that client the whole way through until the issue is resolved. If and only if their responses are becoming more vague or outright nonexistent should you start to take matters into your own hands.
5. Outsource
Chasing down debtors is not an easy task, especially if they’ve already managed to get a head start on you. In some cases, companies would write these debts off if they deem the chase is either too expensive or too much of a hassle. For smaller businesses in which losing money would be devastating, it may be time to hire a third-party debt collection agency that has the resources and expertise to help you track down those debtors.
