People who start a business are often innovative and think outside the box – they are driven by the excitement of starting and building something new, something that wasn’t there before. It’s a great way to go through life, but often the people who bring us new and exciting things need a reality check – business has to be grounded in solid, conservative finance, after all.
No matter how many big ideas or great schemes the entrepreneur has, they will never be able to make it work unless it’s based on a healthy and progressive cash flow. It’s the cash flow that is at the heart of the business, at the end of the day. Here are the top five ways you can enhance cash flow for your business.
Create a simple plan
It’s not always as straightforward as it seems; charting down your expenses and income will allow you to understand your cash flow better. You’ll notice that cash flow can actually be more complicated than originally thought – the challenge lies in simplifying things as much as possible.
Understand seasonal changes
Most businesses have seasonal fluctuations, and this is not always desirable. This can be remedied, however, by diversifying and focusing on different aspects of the business during different seasons. It may take a few years to understand the patterns and find adequate solutions, so start as soon as possible.
It’s okay to have debt
Chances are you’ll need to avail of a loan or credit line from a supplier at some point – and that’s perfectly okay. However, try to avoid it whenever possible, and handle it wisely.
Collect as soon as you can
If necessary, offer discounts for early payments, or engage in invoice finance. This will ensure your cash flow remains positive whilst allowing you to focus on the most important aspects of your business without having to juggle accounts and chase clients.
Be clear at all times
When offering or accepting credit, be very clear with the terms and conditions. By being clear from the start about when and how you’re going to collect, a lot of misunderstandings can be avoided.
It may seem unfair to have a mentality of “pay as late as you can, collect as soon as you can”, but it’s really in the interest of the business to do so. Mind you: just because you should pay as late as you can, doesn’t mean you shouldn’t pay. Furthermore, it’s often wise to collect even before the due date of the invoice (via a third party, such as a collection agency) because you will have funds coming in faster. If you want to success, pay attention to the most important aspect of your business: your cash flow – as the central London accountants from GSM & Co. will affirm every time.
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