Cash management tips for small businesses

US-PDGov

Are you flabbergasted witnessing relatively handsome profits on paper but less cash flow in reality? The stark discrepancy in the accounts might be a result of inefficacious cash management which, if overlooked might land your business on the rocks.

Ineffective management of cash in a small business is not seen with a favorable eye by investors, who would obviously not want to invest in a company, which has no stability. Hence, to keep your company viable, it is imperative to learn the ways of managing cash efficiently so that the cash not invested on any fixed inventories is available to you in optimum amounts at any given point of time. Here are a few tips on managing your cash flow effectively. 

Timely payment – One of the biggest causes of small businesses going bankrupt is customers not paying on time. To ensure that your customers are not delaying your business deals, you require to be on your toes to prepare and send your invoice as soon as the goods are delivered to your customers. A mention of penalty charges in case of payment received post due date can speed up the process. 

Laying off or tightening credit for customers- When your customers fail to pay you on time, you too get delayed in paying off your suppliers and a vicious circle is created. In order to ensure that your working capital is managed effectively it is required at times, to lay off certain customers who have not paid dues for a considerably long time or to restrict credit lines for those who have been constantly delaying payments. Of course, you cannot take such a step suddenly and it is essential to analyze the history of payment of the customers on grounds such as how many days or months they are behind, whether they have paid the full balances after a lapse of the due date and the likes. 

Analyzing new customers- While keeping a track of your old customers you cannot simply rely on the new ones that you are getting linked with. Therefore, if your customer is asking for goods on credit it is important to check into their financial background and past credit records. It is also advisable to refrain from sending further orders till the time the past dues are cleared. If your customer is unable to pay the whole amount, try to convince them to pay in installments. 

Managing taxes- Business entrepreneurs are often seen burdened with too many taxes and if you too are facing such a situation, it is time that you sit to discuss ways of optimizing tax outflows with your attorney. 

Managing communication and inventory costs- Doing away with too much money spent on communication in the form of telephone bills is an equally important thing in cash management. Instead of splurging on phone and mobile bills, resort to Voice Over Internet Protocol or VOIP systems as an option for effective and inexpensive means of communication. In case of inventories, do not order more than is required, while attenuating on the quantities of those, which are not selling frequently. 

Finally, growing the surplus cash either by creating a savings account or by investing it in some other way is a sure way to boost your business by efficacious cash management.