Cash flow management is very crucial to the financial health of any business, large or small. And this particularly holds true for small and medium businesses and startups, for whom every penny counts as they venture into stabilizing their business operations.
But what is cash flow? It is the net amount of money being transferred in and out of business. In other words, it is the difference between what the company owns vs what the company owes. And ideally, there should a good gap between the two for conducting daily operations smoothly and business growth.
A negative cash flow, on the other hand, affects the ability of a company to expand & explore or even conduct their day-to-day activities. In this post, we will give you some tips on how to improve the cash flow management of your business easily!
1.Deposit Cash Balance in Business Savings Account
Always keep your personal and business finances different. This will make monitoring of your cash flow, tracking expenses and tax planning easy. If you don’t have it already, open a separate business savings account, with the best rate of interest.
Compare different banks, the interest rates they offers along with the schemes. Also, make sure there are no hidden charges such as monthly maintenance fee etc. Check that it provides a good return on your money as it is generally much higher than your personal saving accounts.
2. Liquidate Excess, Obsolete Inventory
The demand for products keep changing in the market. And the inventory that you have may get old and obsolete. Rather than clinging on to the materials in a hope that someday someone will purchase them or it will come to use, it makes sense to liquidate or resell it.
Selling your old inventory at a lower price is better than keeping it in the shelf all life! Some money is better than no money. Also, it will take up space that can be utilized for keeping something else. And moreover, not selling it is only adding on to your storage and maintenance cost.
If you have excess of raw materials or equipment, you can consider re-selling it to other buyers within the industry. But if there are products or services that have gone out of fashion or become old, you can re-sell them by offering heavy discounts.
3. Ask for Advance Payment on Large Orders
If someone places a large or a custom order, don’t shy away from asking for at least 50% advance payment upfront. If it is a customised order, it will be useful for only that individual or organization. Therefore, taking an advance payment would provide you security as well as lessen the risk of getting a late or reduced payment at the time of delivery. Also, it will prevent you to use a lot of cash from your own pocket on the order.
Also, you can use the advance payment in producing the item or product. Customers do understand such things and you can also make it a part of your policies to avoid any arguments.
4. Offer Early Payment Discounts
First things first! Make sure you send out invoices on time. If you have a set procedure of sending out invoices quickly, you will not have burn your time chasing them. What you can do instead is, send your customers reminders when invoice is due.
Generally, companies gives 30 days after the invoice is sent, to make the payment. However, you can offer your customers discounts for making the payments on time or even before it. For instance, you can offer a discount saying that people who make payments in the first 10 days of sending the invoice will get 2% concession! You might start receiving payments early, making your cash flow better. Make sure you set a procedure for this too!
5. Install Payment Gateway to get Payments Faster
Offer online payment solution to your customers for quick payments. You can ask your customers to pay online via cards, UPI, wallets etc. so that there is no issue of sending invoices and receiving payments later.
Payment gateway such as PayUmoney offers all payments options such as debit/ credit cards, UPI, wallets etc. It is highly secure and convenient to use. Also, it has same day settlement feature for its merchants through which a merchant receives settlements on the same day of the transaction, via IMPS for the amount less than 2lac per day. Therefore, you will get your payments on the same day, the customer pays!
Signing up with PayUmoney will definitely improve your cash-flow and help in the growth of your business.
6. Revaluate Day-to-Day expenses
Managing cash flow is not just about getting more money in the system (inflow) but also keeping a check on the money going out (outflow). Check your business expenses regularly and see if all of them are necessary and the best available option in the price that you are incurring on them.
Streamline your processes with more efficient ones. Make use of various softwares and tools available in the market to cut down on time spent on lengthy processes such as sending invoices to all the customers.
Know that you do not have to buy everything new. Look around and see what equipment can be bought second hand and is of one-time use only.
Having a positive cash flow gives you a lot of courage and support to carry out new experiments in business. Using the tips above can improve your business cash flow to a great extent. It will keep you out of money stress and help you for your future growth.
As mentioned above, integrating with a good payment solution is essential for getting payments fasters as well as to provide a seamless payment experience to your customers. PayUmoney is India’s leading payment gateway. To know more,