|Small Business Information|
Eight Ways To Improve Your Companys Cash-Flow ? TODAY!
Cash is the lifeblood of any business. As humans need air to breath and food to eat, your business requires customers that provides the primary substance that keeps a business in business: cash.
But in the real world, businesses that invoice their customers for payment can face a challenge in getting paid, especially when the customer may be another business or a government agency. Somehow the terms "NET 15, NET 30 or DUE UPON RECEIPT" seem to go unnoticed by the customer and the invoice doesn't get paid until 60 to 90 days after the work has been performed. In other cases, the invoice may be paid after 120 days ? if not paid at all. For the seller, this can be the start of cash-flow challenges, which can rapidly escalate into a crisis.
In spending over 10 years working to help turn around financially troubled businesses, I have found that the key to better cash-flow is to ensure that the business implements a system to get their receivables paid quicker and faster, with less pain for the customer.
Here are eight ways to start improving a company's cash-flow today:
1. Give a Discount for Paying the Invoice Before the Due Date: Offer an additional percentage off or maybe a fixed dollar amount off of the total invoice if they pay within 5 days of the invoice date. This strategy works well because it provides a win-win situation for you and your customer. If they pay before the due date, they will save some additional money and you will be paid a lot faster. If they do not take advantage of your generous offer, they will be responsible for the balance owned. It also helps keep good customers because you have provided an incentive for them to continue to do business with you.
2. Have an Internal Collections System In Place: More often than not, a small business will focus so much on acquiring the client and performing the work that it doesn't dedicate as much time and effort to collect payment. Make sure you send your invoices out immediately upon completion of your work or shipping of your product. If you have the resources, have your staff send a friendly email reminder or make a phone call ten days before the due date (if it's a Net 30 or more term) to the customer reminding them to make payment.
3. Accept Credit Cards: One of the simplest ways to increase cash-flow is to accept credit cards. Once the charges are made, the money is transferred to your account, usually by the end of the business day, or in some cases, instantly. Studies have shown that people and businesses will spend more using a credit card than they will with cash. Offer your customers the ability to pay their invoices via credit card and your sales will increase. Because there are thousands of credit card processors in the United States, you are in a position to compare and negotiate processing rates and equipment rental fees.
4. Accept Checks By Phone, Fax and the Web: This is a very easy way to have your customers pay, with little hassle. There is inexpensive commercial software available for purchase which will allow you to create a check from your printer, based upon a check that your customer faxed to you, or gave to you over the phone. Also, there are online services available which will allow your client to "write" a check over the internet, email it to you and then you can print it and deposit it to your bank account. This is especially a great tool to use to improve cash-flow because while it reduces the wait time for receiving payment, it also reduces the time for the bank to clear the payment if it is drawn on a non-location bank.
5. Consider Accounts Receivable Financing/Factoring: The process is simple: when a company sells a currently due invoice from a credit-worthy business customer to a third party (The Factor) in exchange for getting that money today. The factor advances a certain percentage of the total amount of the invoice and holds a percentage in reserve. When the customer pays the invoice, the factor releases the reserve, less the agreed upon fee (discount rate). With factoring, your company's credit is not evaluated -- your customer's credit is. Factoring can be used as temporary or alternative financing for many businesses. Traditionally, manufacturing companies used this form of financing but today factoring is available to many other companies ranging from construction, import/export, distribution -- even companies that provide services to government entities.
6. Consider Purchase Order Funding: If your businesses provides services to other companies that require purchase orders, you can secure short term funding to be used to finance the purchase or manufacture of specific goods that have been pre-sold by you to your credit-worthy customer. This type of funding entails issuing letters of credit or providing funds that allow clients to secure the inventory they need to fulfill customer orders. This frees up existing cash that your business has on-hand for other use.
7. Have a Referral System: Word of mouth marketing is the most powerful and cost-effective way for a business to acquire new clients. People like to do business with those they like and trust; the same is true for businesses. You need to have a referral system in place with your existing customers, business partners and even your employees to help them to refer you business. A great book that will show you how to develop a word-of-mouth based marketing and referral system about this is The World's Best Known Marketing Secret by Ivan Misner, Ph.D., who is also the CEO and Founder of BNI (Business Network Int'l) , the world's largest business networking and referral organization.
8. Create a Rewards Program: Almost every major business ? from supermarkets to office supply stores to credit cards? has a rewards program. Some offers discounts to its customers in the form of a credit towards a future purchase, or special product incentives (i.e. buy one get one free) or in some cases even cash-back. You can create your own rewards program as a way to retain and reward customers who pay their bills on time or ahead of time. The cost is minimal to your company and results in future, higher value purchases with an increased frequency, and customer loyalty. You can also implement a rewards program as part of your referral system.
By implementing some or all of these strategies, you can help ensure that the cash keeps flowing and your business remains a viable entity.
© 2005, Timothy M. Houston. All Rights Reserved.
Timothy M. Houston is the President of Houston & Associates, a commercial debt management and business consulting firm based in Staten Island, New York with affiliated offices in Texas, California and Florida, (http://www.houstonandassociates.com). In 2005, Tim launched SmallBizSaver.com (http://www.smallbizsaver.com) which is dedicated to helping small businesses to stay in business.
Money Series 1: Who Takes Your Money
Your business is making profits, but where is the cash? It seems that someone has taken away your money. Your bank account is still the same, and your personal wealth is still the same. There must be someone that took your money. Based on my over 18 years of professional experience and study, there are 8 persons that take away your money without your knowing...
A Small Business Consultant Can Help in Many Ways... But One Thing He Can?t Provide
A consultant must remember that the business belongs to the client. There is always a danger that the consultant will take a dominant position to the detriment of both of them.
Job Costing - Do You Know How?
What's your job profitability? I meet with business owners every day that are unsure of their profitability at a company or job level. They "think" they are making money because they have a few dollars in their checking account. Having money in your checking account doesn't mean you are profitable. It might mean you haven't paid all the bills yet, so you have a little cash. Cash and profit are two different concepts. If you aren't profitable, you won't have longevity in your business.
Blowing Your Own Horn ? A Key Marketing Strategy for Small Business
-- Building Credibility Through Success Stories --
Franchise Buyers from Hell
I ran a franchise company for many years, a car wash franchise, and we use to get the most ridiculous franchise buyers who thought they wanted a franchise. It seems we had to deal with these Kookoo birds because they have consumer rights and the Federal Trade Commission, which looks over franchising goes out of their way to let these consumers get away with these tall tales.
How To Accept Credit Cards
If you plan to do business online, then your website will need to accept credit cards. For many, the idea of applying for a merchant account sounds like a daunting task, but the truth is that building an online store is incredibly easy these days. The major credit card processing companies have improved and streamlined the process of setting up accounts, and software companies have had several years to improve their software to the point that it is easy for non-technical business owners to create and operate an online store effectively.
Boat Hull Cleaning Procedures for Owners and Detailers
For really tough boat hull cleaning you will need to break out the acid. Muratic acid is the best for this. You'll want to have a 50/50 mix of muratic acid of 6-8% concentrated (12% is the highest concentration you can legally buy over the counter), water and a good strong sprayer. You can purchase muratic acid at Wal*Mart, K-Mart, Pool Supply Stores, Home Depot, Lowe's, Van Waters and Rogers Chemicals. Sears Craftsman makes a nice strong sprayer or try a local store for another brand of commercial pump-up sprayer.
How To Start A Blind Cleaning Business Quickly And Easily
Starting the blind cleaning business is one of the best marketable business ideas you could latch on to. If you give the requisite amount of time and dedication, there will be no cap on your earnings. No wonder, there is pleasure unlimited in being one's own boss. A lot of ambitious people like you have made successful entrepreneurs of themselves, as they mastered the principles of a successful blind cleaning service.
The ABCs of Fundraising
There are many little details that go into making sure your fundraising event is a successful event. The key is to have all your fundraising details laid out in front of you before you even start. Below are some tips to help you get started on the right foot for your fundraiser:
Do You Own Your Business Or Does It Own You?
What was your aim when you went into business for yourself? Chances are you wanted to be your own boss, be in control of your future, improve your chances of earning a high income, among other things.
Is It Recess Yet?! Confessions of a Self Employed Workaholic
I have a confession to make. My name is Caroline and I'm a workaholic. I try to pretend I don't have a problem. I try to cover it up. But, in the end I'm faced with the cold hard truth that I am a person who works too much. I even tried to take work with me on my honeymoon! (I got busted!)
Five Break-through Ideas to Immediately Increase Profits and Improve Cash Flow
Too often in business we get trapped into reviewing our sales numbers without analyzing the all important "profit" number. This is commonly referred to as the "bottom-line" of a business. There are various ways you can dramatically impact your profitability.
Four Reasons Why Small Businesses Succeed (or Fail)
The American system of business management has been admired and emulated around the world. This system is characteristic of two traits in the American psyche: (1) enthusiasm for the future and making things better, and (2) an openness and willingness to change in order to achieve that end.
How to Profit from a Concrete Roof Tile Business
Concrete Roof Tile Business: During the 2004 summer season, storms plagued the United States. Damages from the Hurricanes in Florida alone sent resources in the southern states scrambling. The shortage of qualified roofing professionals and supplies were felt immediately. Roofers from all over the United States began hunting down supplies and heading south. There were also many people who saw a roofing business opportunity and invested in roof tile businesses.
How To Ruin Your Business
If you're like the rest of us, you've spent a lot of time trying different things to make your online business come together. There are countless methods of conducting a viable marketing career, but there are also as many ways to destroy one as well.
Are You a Small Business Casualty?
When a person knows and knows not that he knows. Teach him.
Cashing In Your Chips & Pastures New
No, I'm not talking about gambling or dairy cows ? although business is often referred to as a gamble, I'm referring to your exit strategy. That time when you decide to 'play no more' and go off and practise your golf swing. Yup, I'm talking about selling your business?
FTC Adding to the Franchise Rule
Last summer the FTC put forth a report and then asked for comments on modifications of the franchise rule. There has been no real significant changes since the 1970's, but lots of opinions and case law along the way. All these complications of rules and the rules proposed today by the Federal Trade Commission do not help franchisors remain efficient or franchisees sell more pizza, hamburgers or donuts.
Is Your Small Business Name Important?
You bet a name is important. Many small business owners try to come up with a clever name for their business rather than one that explains what they do. And, nine times out of ten, that is a mistake. Your business name should give your prospects some idea of what your business is about.
Leverage The Power of Publicity For Your Small Business
Your business is only as good as the number of people who knows about it. For your venture to grow, you need to start spreading the word about your business. You may have the best products your field, but you cannot expect your business to breach the million-dollar mark in sales if only the people in your street know about it. Some entrepreneurs start doing promotions only when their businesses are up and running, while some market their business even before the products or services are fully launched.
|home | site map|