5 Tips for Improving Your Business’s Financial Position
In an entrepreneurial age, new businesses are popping up at every corner, each with a dream to make an impact on the industry and become the authority in the competitive marketplace. Needless to say, this opportune business environment leaves little room for faulty decision-making and poor bookkeeping. In fact, if you consider that the majority of startups fail because of inadequate cash flow management, you can easily grasp the importance of upholding your business’s financial position from quarter to quarter.
After all, money does make the business world go round. Along with having a crack financial team at your side and a sizable rainy day capital to provide a soft cushion for potential monetary downfalls, it’s important to establish a positive cash flow that will allow your business to grow on all fronts. So, let’s take a look at how you can improve your financial position and pave the road to long-term success in the industry.
It all begins with a structured financial forecast
First things first, there can be no real long-term financial success without a sound strategy effectuated by a comprehensive financial overview. If that sounds overly complicated, try it this way: you need to know where your business currently stands financially, monitor industry trends, and then craft a financial forecast for the near and far future. Only in this way can you plan a steady rise to prominence in the field, through innovation, expansion and better customer experience.
Alas, this is oftentimes easier said than done for a small or medium-sized business, as entrepreneurs find themselves unprepared to meet all the expenses associated with early expansion and growth. Remember, growth requires monetary investments, and you need a detailed cash flow projection in order to plan and prepare for these expenses down the road. Moreover, such a comprehensive report will allow you to anticipate surges in expenses, but also surges in payments from customers.
Redefine your credit terms for clients
In the modern business world, there is not a company that demands of their clients and customers to pay for products and services in full, or god forbid, upfront. Everyone works on a credit basis, and you should too if you want to retain customers down the road and form trusting relationships. However, that doesn’t mean that you should allow payments to arrive 30 days after the due date.
To combat this common problem and ensure cash flow, you want to evaluate your credit terms and whether or not your customers are comforting to your terms or taking you out for a ride. By tightening your payment terms and sending out friendly reminders, you can effectively cut waiting times and get your money when it’s due. Moreover, make sure to invoice promptly in order to shorten the gap between invoicing and getting paid – a gap that’s already at least 30 days long.
Invest money in your business with invoice financing
One of the most efficient and effective cash flow solutions for businesses doesn’t have anything to do with chasing down clients and customers, but rather it has to do with invoice financing. Rather than waiting to get paid in a month’s time, you can have your invoice paid with finance and continue streaming cash flow towards all crucial and operational processes.
Some of these are payroll expenses and overheads, but others have to do with the very essence of your brand – innovation and improvement. By having the capital to invest in your company immediately, you can seize every opportunity and stay one step ahead of the game. What’s more, invoice financing will allow you to preserve a healthy relationship with your clients and customers.
Spread out your outstanding payments
Many entrepreneurs and business leaders tend to make the inadvertent mistake of being overly diligent with their payments. That is, they believe that by tending to all outstanding payments immediately, they can get it over with quickly and focus on the next crucial task. While it is true that paying all of your bills immediately will eliminate the chore altogether, it might not be such a prudent solution.
Pay for everything now, and you might end up searching through your back pockets to find the money for a crucial marketing campaign that has to go live tomorrow. That might be an oversimplified example, but it does a good job at explaining why spreading out your outstanding payments is a good idea. So instead of springing for the checkbook immediately, try to pay your bills strategically, and closer to their due date.
Offer various payment methods to customers
Last but not least, another excellent solution to your cash flow problems might lie in payment diversification, or giving your clients and customers the freedom to pay for your products and services on their own terms.
From accepting every type of credit card payment, to getting paid through money apps such as PayPal, and even offering check payments, the choice should be entirely up to them so long as you get what you’re owed. By diversifying payment methods, you can easily foster a positive and trustworthy relationship with your clientele without the risk of setting them back financially.
Cash flow management should be the no.1 priority of all 21st-century brands looking to grow efficiently and effectively in the competitive marketplace. By following these five steps, you should have no problem ensuring a bright financial future and making a name for your brand in the industry.
You may also be interested in: What is a Robo Advisor?
Writer: David Webb
Disclaimer: All investing can potentially be risky. Investing or borrowing can lead into financial losses. All content on Bay Street Blog are solely for educational purposes. All other information are obtained from credible and authoritative references. Bay Street Blog is not responsible for any financial losses from the information provided. When investing or borrowing, always consult with an industry professional.