9 Ways to Improve Small Business Cash Flow
Friday, September 08, 2006
To stay in business, companies large and small need to maintain proper cash flow. A lack of operating capital is one of the main reasons that businesses fail. Here are some suggestions on how to make sure your building, remodeling or repair business has enough cash on hand:1. Bill Promptly - It's easy to think about moving on to the next job, but it's important to send homeowners a detailed bill with obvious payment dates. Also, send a reminder about two weeks before the official due date.
2. Stick to Budgets - Know what you're going to spend for new equipment, equipment maintenance, and on company supplies and stick to it. It can hurt your cash flow and cut into your profit margin.
3. Offer Early Payment Incentives - You'll be surprised at how offering a 1% to 2% discount for early payments will make your clients mail out their checks in a hurry.
4. Pay by Credit Card when Possible - Do this only if you're receiving 0% credit card offers for an initial period. It's a great way to keep cash handy and you can transfer the balance to another card once the initial time period is up.
5. Schedule Payments - Pay suppliers as late possible, avoid late fees, and plan out a payment schedule so that you're not paying everyone all at once. Spread out regular payments and try to arrange alternate payment dates to work with your schedule.
6. Avoid Slow or Non- Paying Customers - In your qualifying phase, make sure the homeowners have payment options in place. If they have trouble even coming up with the initial deposit, you might have to pull away from the job. Think of the man hours you'll spend trying to collect on the job during and after.
7. Barter Instead of Cash - See if you can find a barter arrangement for services. You might provide plumbing work in exchange for a website design - talk with your potential clients to find out if they provide a service you need.
8. Don't Spend it When You Get It - Avoid the urge to spend a portion of any payments you receive. Try to find an accountant or money manager who can watch over your transactions (possible barter?) And when you've got cash, don't stick it under the mattress. Place it in an interest-earning account and let it earn money for you.
9. Maintain Timely Collection Practices - Collections are not fun, but plan for some collection activity time during every week. You don't need to be mean and nasty, but you need to provide constant reminders for payment to make sure it doesn't get out of hand.
Be sure to Bookmark our Contractor Update page and return to it often for new new posts, new information, and additional ways to help expand your business and make you more profitable.
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1 Comments:
These are great ideas for improving cash flow not just for contractors, but most small businesses!
commented by 
Marshall Lebovits, 4:57 PM
Marshall Lebovits, 4:57 PM
