The basic principle of business finance includes cash flow management. Without money to fund your business, you run the risk of not paying the expenses or having to borrow money.
Just as the unexpected happens in life, so does the unexpected at work. It could be as simple as a late payment to a customer or a broken piece of equipment. Anything that requires you to spend money that you don’t intend to use can happen.
Also, the current economic climate is not helping business owners. Even if you pay close attention to your business money, forces beyond your control can affect your cash flow.
So how can you best cover your expected and unexpected business expenses? Additionally, how can you ensure there is sufficient cash flow to grow your business? The following tips can help you manage your cash flow at the highest level.
Manage your customers’ payments
To stay alive, you must be paid. You can’t wait months to get paid or risk not receiving it at all. Some of the things you can do to avoid customer payment issues include the following:
Bill quickly. When you’re done working for a client, be sure to bill them right away. You want to be paid as soon as possible, and many companies have longer payment cycles. The faster you receive the bill, the quicker you will be paid.
Also, consider performing all electronic billing and payments. Sending invoices by email is fast and often secure. Many email applications provide confirmation when receiving and reading an email.
Setting up electronic money transfers, credit cards, or PayPal accounts can help preserve your company’s financial health. You won’t have to wait for checks to be mailed, processed by your debt management, and deposited into your account.
You can also offer incentives, like discounts, for your customers to pay early.
Re-evaluate what you are paying customers
The essential guide to business financing is to evaluate your product or service big enough to make a profit. To make sure you make a profit, you need to know all the costs. It’s easy to overlook some of the costs involved in serving your customers. If you don’t take all of the expenses into account, you are likely losing money or at least not making as much profit as it should be.
Other business financing practices include bundling your offerings and selling additional products and services to your existing customers. Stay focused on delivering value to your customers, not just making profits. You want to maintain a long-term relationship with your customers to ensure future cash flow.
Finally, always ensure you have emergency funds available to deal with a bear market, natural disasters, equipment malfunctions, or any other unforeseen things that may happen. If the emergency funds remain unused, you will have a surplus to grow your business strategically.