SOME PEOPLE ARE TEMPTED TO SPEND THEIR MONEY AS soon as they earn it. But entrepreneurs who are spending more money than their company is bringing in are in real trouble. Maintaining positive cash flow is one of the most important aspects of running a small business, both in the early days and beyond, says Shaun Coard, senior vice president and business banking manager for Wells Fargo, Houston. "Business owners should analyze cash outflow, or expenses, and inflow, or receivables, to improve the company's cash flow," she says.
Here's how you can maximize your company's cash flow.
1 Manage your overall expenses and cash outlay. Scrutinize your expenses to see if you can trim off any fat--anything not needed to run the business. Also, look for better deals on routine expenses such as office telecommunications, Internet, and wireless bills. By lowering your overall expenses you are keeping more working capital in the company.
2 Speed up your collections. Encourage faster payments from customers and vendors. What is your invoicing process? Do you invoice immediately upon delivery or completion? Infrequent invoices mean infrequent payments. A way to speed collections is to offer incentives, like discounts ranging from 2% to 5% for net terms of 14 to 30 days. Clients will take advantage of discounts, especially on large orders.
Commit to collecting receivables when they are due. Don't let payments go unattended to. If your net terms are 30 days and you haven't received payment on the 30th day, someone should be inquiring about when that payment will be made. If you don't have the time, hire help or contract the task out to a billing company. Don't be leery about nagging someone who owes you money.
4 Accept credit card payments. If you think accepting...