Top Ten Tips for Improving Cash Flow

Cash is king-so they say. When you work for yourself, you need to be aware of ways to improve the cash flow. Budgeting and collecting are not glamorous but they are both key to having a successful business. Working in a successful business is much more fun than working in a struggling one!

By Alvah Parker, SCORE Accredited Business Counselor

Cash is king-so they say. When you work for yourself, you need to be aware of ways to improve the cash flow. Budgeting and collecting are not glamorous but they are both key to having a successful business. Working in a successful business is much more fun than working in a struggling one!

  • Stick to your budget. (If you don't have one, make one now.) The budget is part of your business plan. You want to know exactly how much to spend on each large item you purchase and when you will have the cash to do it. Your cash flow projection coupled with your forecast will give you the proper timing for making purchases. The items you have budgeted for should also be part of the business plan.
  • Bill your clients regularly. Many business owners are so busy selling to new clients that they forget to invoice the clients they have already worked with. Put the task of billing your clients on your calendar and then stick to that schedule.
  • Get a deposit for your services before you begin the work. If you are going to be working with a client over a period of time, you will want to request some money up front before you begin to deliver your product or service.
  • Give a discount for early payment. You will be able to collect the money more quickly if you offer a discount for prompt payment.
  • Accept a credit card for payment. Although you have to pay the credit card company for this service, having the convenience of a credit card allows the client to pay immediately. Collection is now the problem of the credit card company.
  • Use your own credit card to finance purchases but do it cautiously. If the interest rate is low and you can pay the credit card company back relatively quickly, credit cards are often a good way to even out your cash flow.
  • Establish a line of credit with a bank. This is relatively easy to do so long as you have good credit and it gives you a cushion of cash when things are tight. Sometimes the bank will offer a really good rate to encourage you to become their customer for other banking services.
  • Put the cash that you have on hand in an interest bearing account. No reason to have cash sitting in an account that doesn't accrue much interest. As cash grows consider money market accounts, CDs and savings accounts.
  • Pay your outstanding bills judiciously. Notice which vendors are willing to wait for payment, which give you a discount for on time payment and which will charge you interest if you are late. Schedule payment to maximize the cash in your account.
  • Consider getting an expert to watch your cash flow. Have someone (financial advisor, accountant, bookkeeper) available to run financial reports each month so you know exactly where you stand in your business.