Common Cash Flow Problems and How to Remedy Them
Accept Credit Cards From Customers
You do not have to be a retailer to accept credit cards. Many small business owners make this mistake, and it can potentially cost you a lot of business. Consumers use credit cards to make a variety of purchases, and a lot of them don’t carry cash on them. When they use a credit card to pay for things, you will typically get the money in two to three days. While this can seem like a bit of drag at first, it will quickly remedy itself as the cash flows from these transactions pour in.
Catch Credit Faults Earlier
Keep a check on aging accounts from existing customers. Do not wait until they have been delinquent for six months – by that point, you’ll likely never get that money from them. If you have not received a payment by the next billing cycle, send out late notices. If you have not received a payment from a company that usually pays on time, call them to find out if there is any problem with the service you are providing or the order. While many cases of delinquent payments result from negligence, this is not always the case!
Raise Your Prices
When you first started out, you may have kept the prices of your products or services low to build up a customer base. However, as the business matures and you build up a steady stream of customers, it many come time to raise your prices. You will want to be careful about doing this – if you lose more business than what you get from raising your prices, then you’ll actually lose money in the long run. But done right, you can easily increase your cash flows this way.
Get Pay Advances
Do not start working without pay. Ask for at least one-third of your total pay if you are working on a long-term project. This is not unreasonable in most industries, and your client should not have an issue paying this. Be especially persistent about this if it’s with a new client; it will be difficult to collect if you don’t know the customer well. If the business gets defensive about paying a minority of the total fee up front, that can often serve as a red flag.