What is cash flow and how does it work to maintain your business ? Cash flow is the money that is moving in and out of your business in the pre-set period. It counts the money that is coming from customers or customers who are buying your products or services. Working capital can be a problem for many small business owners because with the lack of it many business owners suffer to pay fixed and variable costs and expenses.
How to get more money for cash flow
Think of “cash flow” as a dam that when opened generates energy for a city, but in that case is your company’s current account. If more money is coming in than going out, you’ll be in a “positive cash flow” situation and you’ll have enough to pay for all your bills.
If more money goes out than you enter, you run the risk of being discovered, and you will need to find money to cover your monthly expenses. This is why new companies usually need to take working capital financing for companies in the form of a business loan or line of business credit to cover the lack of cash flow. Below are a few strategies if you are in the same boat.
You are making payments manually
Switching your payments to automatic can be revolutionary to help you design my business to the next level. Try this format, after a few months you will realize a huge significant reduction in the number of late payments.
Of course, a failure may occur from time to time, but not as often as it usually happens when we decide to pay manually.
You’re only billing once a month.
This is a cash flow trick that every businessman will sooner or later have to learn. Instead of waiting until the end of the month to bill your customers, do so every two weeks or weekly. Business promotion or factoring can help with anticipation of receivables.
This is especially useful if you are dealing with net paydays of 30 or 60 days to wait for payment. This way, you have immediate cash whenever you need it and you will not have to wait for the invoice to expire.
Another way is to try to negotiate larger payments two or three times within a specific period, eg one half of the project and the other half when a service or project has been completed.
You are not trying to get money in advance
For those who decided to start a business with little capital, you will surely have to find options to relieve cash shortages in cash flow , one of which is to ask for payments in the form of advance deposits or shorts. This does not work for all clients, but you would be surprised how this type of procedure is not unrelated to customers and many will agree.
Are you still dealing with checks?
Working with a check is one of the biggest risks for entrepreneurs. If you have customers paying by check you are probably dealing with many late payments. It is best to suggest that they pay with invoices (duplicates), credit card or direct transfer.
Do not be lazy
All the tips here about cash flow that we have mentioned up to this point refer to conditions and strategies for specific payments. So make sure that any of them fits for your business or business and get to work. Now I want to talk about a big problem I see among business owners that is – the lack of foresight.
Often entrepreneurs get great project deals and lose the opportunity by thinking that they could not deal with it. When the project in progress ends, they realize that they have nothing aligned to start and start to scare.
You can avoid this all if you are systematically structuring your business or company to get involved in multiple projects consistently. If you do not stop accepting work then you will experience fewer problems in your cash flow .
Is Cash Flow a Problem for Many Business Owners? You can be sure it is. That’s how it’s supposed to be? Not really. By building your strategies correctly and taking the proper financial and structural precautions, you can have more stable cash flow and better plan your finances and the future of your micro, small or medium sized businesses.