Every finance professional knows the monumental importance of cash flow in business. Having strong, positive cash flow can mean the life or death of a business, and CFOs are constantly on the prowl for new ways to increase liquidity and secure their companies’ financial future.
Because entrepreneurs and business owners are typically more focused on the fun parts of owning a business, such as creating innovative products, solidifying business relationships, creating stellar marketing strategies, and making sales, it’s up to the CFOs and heads of finance to be proactive and take the required steps to increase liquidity. While money constantly goes out the door in terms of expenses, vendor payments, bills, and even losses, it’s easier said than done to get just as much, if not more, money flowing through the business on a healthy, consistent basis.
In order to increase cash flow in the year to come, consider implementing these nine simple steps.
1. Establish Payment Terms That Benefit Your Business
If your payment terms allow clients to pay you net 90 days or more after delivering goods or services, you’re likely going to have cash flow issues. Change your payment terms to 10 or 30 days instead, so you have the money you need when bills need to be paid.
2. Change Your Invoicing Approach
Many companies wait until the end of the month to invoice their clients. This just leads to you waiting longer to get paid. Instead, change your approach altogether. Send out invoices the moment you’ve completed work or shipped your products in order to accelerate payments.
3. Require Credit Checks
Any of your new non-cash customers should be subjected to credit checks before you do any work. This can help you see a history of non-payment and stay clear of doing business with them.
4. Follow Up on Invoices
If a client is late paying you for goods or services, follow up immediately. Clients will take advantage of your lax and disorganized accounts receivables if you don’t remind them that their payments are past due.
5. Implement a Cash-on-Delivery Policy
If you have consistently slow-paying customers but don’t want to sever the relationships altogether, consider instituting a cash-on-delivery policy as an alternative to refusing to do business with them completely.
6. Sell or Lease Unused Assets
Any excess inventory, equipment, or materials in your warehouse or storage units that you don’t need anymore can be sold for cash. You can sublet extra office space, too. This can increase cash flow in a pinch when you really need it.
7. Utilize Cheque Scanning Technology
Instead of waiting days or weeks to find time to get to the bank and deposit cheques, use cheque scanning technology to get access to your funds sooner. You can scan and deposit your cheques to your bank account from anywhere, at any time. When you’re not sitting on so much cash that you can’t access in the form of uncashed cheques, you can improve cash flow.
8. Invest in Currency Recycling
A currency recycler is a cash management machine that automatically accepts, sorts, stores, authenticates, and dispenses cash for transactions. It uses the same money that comes in for future customer transactions. By recycling your cash throughout the day, you won’t need to have so much cash on hand in your vault in case you run low. Currency recycling can reduce your vault holdings by more than 10%, so you can have more liquidity.
9. Use Currency Counters and Sorters
When you’re losing money due to internal theft, administrative errors, and other losses during the money counting process, you ultimately have less cash on hand when you need it. Put a stop to human error and theft and keep more of your hard-earned money by investing in currency counters and sorters. They’ll do the work for you, quickly and accurately, so you can stop losing money.