Dangerous cash flow mistakes to avoid
Running a business is filled with a number of challenges, but none may pose the risk to the financial health of your organization like your cash flow does. Businesses commonly make cash flow mistakes here and there but you can easily fix them in a hurry if you know what you are doing. Here are some dangerous cash flow mistakes to avoid in order to keep your business running properly:
Cash flow mistake # 1 - Neglecting your invoices
When a customer orders a product, how soon do you invoice them? Failure to invoice in a timely manner can leave you with a number of problems for your business as your cash flow survives on timely payments from your customers. If you want a month before you send out your first invoice to your customers, it can be 60 days before you will ever see a payment from your customer. Once a product is ordered, you need to invoice. Failure to send out an invoice can cause your customers and other businesses to forgo the payment for a long time and this will leave you in a very difficult position as you are trying to sustain your cash flow so you have money to pay your vendors. With the new electronic programs out there now you can easily send out your invoices via email within minutes of the transaction. This is a great option, just be sure that you have an online payment system where your customers can go and pay their invoices. To help your cash flow problems you should try asking for 20% of the total invoice amount up front and the rest within 30 days. By doing so, you will be able to acquire enough money to pay for your cash flow needs immediately and then you can wait on the customers to pay the rest of the invoices and you can put it back into your cash reserves.
Cash flow mistake # 2 - Not offering your customers options
Do you have an online payment system for your customers? Do your customers have payment options to use when they need to pay off their invoices? A lot of businesses still run with a check and cash method. If you don't accept credit card payments, you'd better catch up quickly. Even though you have to pay some small fees to accept credit cards, it's easier to pay a small fee now and acquire the money from your customers as soon as possible. Online payments are another option to give your customers. Online payment systems are easy to use and you have the money from your customers instantly. Provide a link on your website where your customers can pay their invoices. PayPal is free and easy to use and it's a great way to accept money from your customers. Another option you need to concern yourself with is the invoicing. Perhaps you need to start enrolling your customers in an automatic bill pay program so you can make sure you actually acquire the money they owe to you.
Cash flow mistake # 3 - Not negotiating with your vendors
When you have to wait 30 days or longer for your customers to pay you, it can cause problems for your cash flow when you need to turn around and pay your vendors. A lot of vendors will negotiate payment terms with you and this will give you an extra 15 days or longer to pay on your invoices. This is a great option as you will be able to easily sustain your cash flow and keep your business afloat. Be sure to ask your vendors if they do offer discounts for early bill pay as you don't want to lose money by trying to but more time.