Stabilizing your cash is one of the most important jobs of any business owner. Many factors can temporarily impact your cash flow, such as emergency spending or seasonal sales losses. If you notice a trend toward negative cash in your business, it is time to act before it becomes chronic. Make sure you are managing the following areas for potential cash drains.
Deposit the Money
Checks sitting on your bookkeeper’s desk do nothing to help your business until they are in the bank. Insist that check payments are deposited daily. Almost all banks offer some type of remote deposit, either via mobile app or check scanning software. Even when your bank is closed, you can transfer the deposit, and the bank will process it the next business day.
Collect What Is Owed
Scrutinize outstanding invoices frequently. Many customers delay payment until it benefits them. This negatively impacts your cash flow. While some priority customers may receive extended credit, make sure that customers pay on time. Your sales department should focus their efforts on fast-paying customers.
Factoring companies specialize in managing your accounts receivable and give you an advance on your invoices in the process. They are not collections agencies but are beneficial if you or your staff do not have time to manage invoices.
Entice Customers to Pay
Encourage your customers to pay your invoice before others:
- Offer discounts for payments made within 30 days.
- Charge interest on outstanding balances.
- Accept EFT payments, and your money will be available faster.
Get monthly cash flow statements from your bookkeeper. In times of urgency, request these statements weekly. These reports can also help you determine if you are spreading your money across too many areas. Reduce the number of bank accounts, especially if they are charging maintenance fees. Consolidate loans to lower overall monthly payments. Consider leasing instead of purchasing equipment. Develop and communicate income and expense goals for each department and the business.
Take care of all your equipment, from copy machines to vehicles to heavy machinery. Follow the manufacturer’s maintenance guidelines. Call a repair service at the first indication of an issue. Proactive upkeep of your equipment helps you keep your expenses on track. Emergency repairs can negatively impact your bottom line.
Review these areas on a consistent schedule to make sure new expenses haven’t crept into your business cycle. Staying on top of your cash is a non-stop process.