Many new businesses fail because their supply of startup capital runs out. This common mistake is often due to inefficient cash flow management. It is imperative that fledgling entrepreneurs focus not only on their business’s break-even point and profits, but also on maintaining healthy cash flow. Here are some tips to help you accomplish this.
Income tied up in receivables impedes cash flow. Send out invoices immediately upon delivery of goods or completion of services. If possible, request immediate payment, but in any event try to limit terms to no more than 15 days. Have a trusted employee monitor receivables and follow up on late payments. Consider offering discounts if your clients pay early.
To keep capital in your hands as long as possible, communicate with vendors and suppliers about extending terms of payment to 60 days or more. Additionally, in the early stages of your business, limit purchases to essential items until you are making a profit and your cash flow is strong.
Get Some Help
Although owners of new businesses typically prefer to handle everything themselves, it is important to hire an accountant or delegate a trusted employee to keep a close eye on cash flow. Make financial management easier by using quality accounting software, and back up your files in cloud storage for security and to give you the ability to work from anywhere. If you need to hire employees, invest in skilled personnel who are dedicated to their work rather than less expensive employees who make more mistakes and may not stay on.
Keep a Reserve
Entrepreneurs are optimists by nature, but when it comes to cash flow, they should expect and plan for shortfalls. Maintain a cash reserve so that when inevitable emergencies occur, you can handle them with a minimum of stress and loss of productivity.
If you need help finding a loan to increase your company’s cash flow, get in touch with Black Wolf Capital Group today.