Money is said to be the lifeblood of every business. Lifeblood means necessary to life and indeed money is critical to ensure that a business continues to function.
Having money flowing in your business is a key indicator of business health. It shows you are able to meet financial obligations, finance your growth opportunities and run your business profitably. Having a positive cash flow means your business is running smoothly, you have more money coming in than is going out so there is money left in the bank when you need it.
Having a profitable business doesn’t always mean there is money flowing through it, however. Money can get ‘stuck’ in your business in a number of ways making it difficult to access cash when you might need it.
Here are some tips to get money into your business faster:
Keep on top of your invoicing
In the busyness of business, it can be easy to forget to invoice customers timely, thereby delaying receipt of payment and cash flowing into your business. You can use online invoicing solutions and apps such as Zoho invoicing, Xero or Wave to help you keep on top of your accounts, or if you are struggling ask your accountant for advice.
Offer early payment incentives
Offering a little discount to your customers if they pay early could get cash in your hands quicker and save you chasing up for payment. The added incentive for quick payment benefits both you and your customer!
Encourage deposit or payment in advance of work being done
It is good practice to ask for payment in advance of services where possible, whether this in the form of a part payment deposit, or full payment in advance. Not only does it guarantee you’ll receive at least some payment and increase money flowing into your business, but it also sends the right message to your customer and shows a commitment to the project by both parties.
Invoice discounting and financing
Little known by small business, invoice discounting can mean you receive money before your customer pays. You can draw on funds when needed which can help if you don’t have much available money in your business but it is not beneficial to rely on this method solely because charges and interest apply.
Sell end-of-line and excess stock at low margin
If you are having financial difficulties in your business, selling any end of line or excess stock could be a great solution. Not only can this bring funds in, but it can also help you avoid storage costs if you are having to store them. You may need to sell these at a lower margin than you had hoped, but having the money in your business can be more beneficial than money tied up in stock.
These are some of the ways you can get money flowing into your business, but the key is being proactive and ensuring that you are helping it to do so by removing any barriers that may be preventing this from happening.
So ask yourself:
- Do you have the right processes in place to manage your business finance effectively?
- Are those processes as efficient as they could be to ensure that money is flowing healthily through your business?
If you would like help with managing business finances, get in touch with Tayo on firstname.lastname@example.org.