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7 Ways to Improve Your Business Cash Flow

7 Ways to Improve Your Business Cash Flow

For entrepreneurs, cash flow is a vital component of business operations. Business owners shouldn’t just take notice of available cash when times are tight; maintaining an optimal level of cash on hand in all circumstances ensures your business can make it through any financial bumps in the road.

Here are a few tips on keeping your cash flow where it needs to be for business security.

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1. Offer Early Payment Discounts

Incentivize your clients by giving them a discount for early payment. An acceptable discount is 2% but up to 5% may be worth the slight revenue reduction. Your customers, whether individuals or other businesses, like to save money too. Give them a reason to pay you right away and reduce the risk of late or missed payments that cause a dip in your cash flow.

2. Set Up Extended Payment Deadlines

Whenever possible, pay what you owe to vendors right away. For the months when there may be a gap in cash flow and payments, however, set up an extended payment agreement with the people you owe. This can mean an official 60-day turnaround for all payments, or even a clause in the agreement that allows it a certain number of times in a year. Don’t pay late if you have the money on hand, but be prepared in case you need to use that option on occasion. It will save you money on late payment fees and also allow more time to receive revenue to pay the bills.

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3. Build a Cash Reserve

Think of a cash reserve as a savings account of sorts for your business. This is money that is not allocated to anything else but is simply available if you need it. Financial experts recommend keeping three to six months’ operating expenses in a cash reserve, but you can adjust those numbers based on the stage of your business and what you plan to spend in coming months. Figure out a smart amount for what you need to operate, and then set it aside.

4. Finance When it Makes Sense

Just because you have the cash on hand to handle any unexpected expenses does not mean that you should spend it. There are times when it might make more sense to leave that cash alone, and seek out short- or long-term financing instead. You can do this through a small business loan or even a business credit card. Do your homework to find the right credit option for your needs. Don’t break into your cash stash if there is another way around it – particularly when the amount in your cash reserve isn’t enough to cover the expense anyway.

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5. Hire a Money Manager

Sometimes you have to spend money to make money and that is definitely the case when it comes to handling your financial matters. Perhaps you don’t have the budget for a full time accountant on staff – hire part-time help or go to a local firm once a month. It’s difficult to be objective about spending for your business when you own it. Let someone else take a closer look at money coming in and going out – and give you advice on spending and saving.

6. Know Your Break-Even Point

What is the number you need to reach each month to start making money? You can figure this out by adding up your operating expenses, wages, overhead costs, and your own salary. How much do you need to make to meet all of those obligations? Once you have that number in mind, you can spend with greater savvy and as a result, keep your cash flow at its optimal level.

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7. Follow a Budget

This may seem obvious but it’s vitally important to the health of your cash flow. Business owners often focus too much on profits and not enough on spending. You aren’t really getting ahead if the amount you make off each sale can’t cover your other expenses. Save money wherever you can and track all of your business spending. Having a spreadsheet or software that can quickly break down cash coming in and going back out will make you more mindful of how that hard-earned business money is spent.

Keeping a robust cash flow takes vigilance but it will help protect your business during tough times. Your cash on hand gives you more stability and having enough of it will help you sleep better at night.

Featured photo credit: Pixabay via pexels.com

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Annie Qureshi

Entrepreneur

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Last Updated on March 29, 2021

Life Insurance: A Secure Way To Protect Your Future.

Life Insurance: A Secure Way To Protect Your Future.

Life is a journey full of ups and downs. No one can actually predict what might happen the next moment; there are times where the happiest moments do not even take a second to turn into the gravest. Planning for your future can help you face such unwelcomed but irrepressible situations with much ease. We all want to make every memorable event of our life more special and to cherish all those moments happily and worry less, you must financially plan your future. But no one has control over life and death. Who would wish to see his family suffer in his absence? Insurance hands over the financial jeopardy of life’s happenings to an insurance company.

Importance of getting a life insurance

No one has control over life and death. Nobody would like to see their family suffering in an absence, and that’s why many people recommend life insurance. A life insurance plan is one of the best ways to secure the future of your family, even against those financial troubles after an untimely demise. These plans are safe and credible, and you could trust them for your family’s better future.

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On the other hand, a life insurance policy is a contract between a company (insurance provider) and policyholder in which the insurance provider ensures to pay a certain amount of money to the nominated beneficiary in case of the policyholder’s death during the term of the agreement. There are different types of insurance plans, and it is important for you to know the benefits of those plans such as a funeral, medical or some life expenses provided they are mentioned in the agreement.

Choosing the right insurance plan

If you’re about to select an insurance plan, you should consider some important factors:

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  • The time at which you start investing in a program and the number of family members you want to get insured. Obviously, a married man with two children has different needs compared to a single one. The number of persons who are dependent on an individual also varies from person to person.
  • The next thing you need to consider is you and your family needs. What are your child’s dream, your retirement plans, for how long would your dependents need financial support, any personal injury, etc. And do not forget those events or situations that will surely demand a huge sum of money.
  • The next thing one must consider is your current income. You should preferably choose a plan which you can afford.

Now you must be having a pretty clear idea of how to choose the best plan for you. Further, you should also compare various plans offered by different companies and numerous sites available online that help will you to compare them.

Differences between life insurance plans

Here’s a short brief of some plan categories you can choose according to your needs:

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  • Term Insurance Plan – You have to pay once, and your nominee gets the paid money under your misfortune demise. It ensures a person for a fixed time. If you survive the policy period, you do not get your premiums back.
  • Whole Life Policy – This plan continues for your lifetime. Under this, the policyholder has to pay regular premiums, until their death.
  • Endowment Policy –  In case the individual dies during the tenure, the beneficiary gets the amount assured. If the person survives the policy tenure, they gets back the premiums paid with other investment returns along with several other benefits.
  • Money Back Policy – In this a portion of the money invested is returned to the investor at regular intervals. If you survive the insurance term you get the entire amount back; else the beneficiary receives the entire sum assured.
  • ULIPs – These are the life insurance plans that offer you future security plus wealth creation options.

Many people do not opt for whole life policy and endowment policy because of the high amount of money you need to pay, while others may prefer to opt for these if they have a high life expectancy. Surely you will find the best one for you.

So what are you waiting for? Plan for your future and live a happier and carefree life today.

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Featured photo credit: aryehsampson.com via aryehsampson.com

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