How to Keep Cash Flowing
Your business working capital is something that you should always be putting some focus on. When you have a solid amount on hand, it helps to ensure that everything is going smoothly and can help you when it comes to things like securing a line of credit.
Get Some Money Upfront
When you do a big job that is costly, you might consider getting a deposit on the work. You can then use this deposit to help pay some or all of the operating costs associated with a major project. Determine the total cost of the project and about how much you need to offset the operating costs. This is approximately how much you want to ask for upfront.
Reduce the Time Customers Have to Pay
One of the fastest ways to increase your working capital is to ensure you always have money coming in. If you reduce the length of time you give customers to pay their invoices, this speeds up the flow of cash. For example, if you usually give people 60 days to pay their invoices, consider reducing this time to 30 to 45 days. You can always work out special arrangements for particularly large invoices that keep you and your customer satisfied.
Add Interest to Lake Payments
You can add interests to late payments to help recoup some of the money you lose when people pay late. Just make sure that you are clear about any late payment interest upfront so that your customers are aware that there is a penalty for unsatisfied debts.
Collect on Unpaid Invoices
Unpaid invoices are a burden all businesses eventually deal with and they have a negative impact on your working capital. If you are a small business, you can start some form of debt collection efforts on your own to get these invoices satisfied. If you are a large business, you might consider enlisting the help of a collection agency to clear out the invoices left unpaid by your customers.
Repair When Possible
Buying new equipment is costly, so save money by making repairs when you can. However, if you find that you need to make repairs frequently, it is time to consider buying new. It is all about balance and knowing when you can save money by simply making repairs.
All of these methods will help you to preserve your company’s working capital. It is important that you institute as many strategies as possible so that you always have adequate cash on hand.