Six steps to better cash flow
These small changes can make a real difference to your business's cash flow and bottom line.
Improving your cash flow
One of the biggest challenges during the first few years of a business is achieving and maintaining positive cash flow. Cash is the lifeblood of your company. Without it, your business won't have the funds to pay suppliers, employees or fund marketing initiatives.
Remember the golden rule: cash flow is king
- Speed up receivables
If you sell products or services on invoice, getting paid quickly is in your best interest.
Give your customers an incentive to pay sooner than 30 days – which is the typical payment period. Try to collect payment quickly by making it attractive for customers by offering a small discount (1% or 2%) deducted from the amount due if they pay within ten days of the invoice date.
And when the check arrives, be sure to deposit it on the day you receive it.
- Make invoicing a top priority
Same-day or next-day invoicing is the best practice. Set aside time every business day for billing. Consider emailing invoices as a supplement to regular mail. Chase up habitually late-paying customers regularly to ask them for payment.
- Open a merchant payment account
Receive payment quickly by letting customers pay by credit or debit card. This allows you to receive next-day value for your sales and services without the need to handle checks and make deposits.
- Use your business credit card
Consider using your business credit card to pay suppliers and make purchases. Learn about your card's grace period, and take advantage of it — you may have up to 25 days after receiving your statement to pay without incurring interest charges. Some cards also come with cash-back features.
- Put your cash to use
If you buy goods on a just-in-time basis and find yourself with extra cash, put it to use by investing in a short-term instrument such as a high-interest savings account for business or paying down your line of credit.
Bonus Tip: A high-interest savings account for business allows you to earn a competitive interest rate on your cash on hand while ensuring the funds are accessible whenever you need them.
- Invest in technology
The latest bookkeeping software or invoice management services should help you keep up with receivables and speed up customer payments. Often a small investment in technology can help you to reap tremendous cash flow advantages.
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