When a business provides a product or service they expect to get paid. And the sooner the better. Businesses need cash on hand just to operate their day-to-day operations. Cash flow is one of the most important factors that can make or break a company. When everyone owes you money—you have no funds to expand the business or even stay afloat. A US Bank study by Jessie Hagen found that 82% of businesses fail due to poor cash flow management. Managing daily cash flow is critical to customer success.
Small businesses are more likely to struggle with cash flow. Small businesses also make up more than 99% of all businesses. Something has to give.
So what can you do to keep a watchful eye on your accounts receivables and make sure you minimize cash flow issues? There are several factors to keep in mind.
Be frugal with company spending
Every dollar a business spends takes away from their cash flow. Spend it wisely and micromanage expenses. Want a free budgeting template? Here are 5 from Fundera.
Company growth swallows up money
Every business wants to expand and be more successful. But it costs money to grow and that money isn’t recouped right away. If a company grows too quickly, cash flow can become an issue. That’s where Return on Investment or ROI comes into play. ROI measures the amount of return on an investment relative to the investment’s cost. For instance if you are planning on hiring more employees or want to evaluate current employees you should determine the employee’s ROI. Check out “How To Evaluate The ROI Of An Employee” from Forbes.
Sales don’t equal “money”
Many businesses get caught up in sales numbers. But many times the invoice gets paid at a later time meaning a delay in potential cash flow. To combat this delay many businesses are collecting credit/debit cards at the time of service. Check out this video on Coolfront Payments, an easy to use solution for collecting payments. Coolfront also has a great blog post on the topic: “Collecting Payments On Every Service Call.”
Inventory factors into cash flow
If you’re selling a product it has to be built and stored somewhere. That’s all potential money that’s in limbo. Too much inventory and you’re strapped for cash. Too less and you can’t meet customer demand.
Forecasting is important
Planning for expenses in the future is critical to cash flow. If you want to grow forecasting can help you do so efficiently and sustainably. A great resource is “Sales Forecasting 101.”
Cloud-based accounting increases revenue
More than half of large companies use cloud accounting. It saves time, resources, storage and ultimately money. Research by Xero found that companies that utilize 100% cloud-based accounting had 15% higher year over year growth.
It’s hard enough to keep up on money owed to a business without the dreaded “non-sufficient funds” notice. As ZZ Top says “A man gotsa get paid!”
Introducing eCashflow a FREE and completely legal service that allows a business two additional attempts to recover checks, or recurring payments from your customers when they return as non-sufficient-funds. This can be a huge help before having to jump down the time-wasting collections rabbit hole.
With eCashflow you will:
- Receive 100% of the recovered payment, even when utilizing the secondary collections option.
- Reduce your in house collection costs with fewer items to collect yourself.
- Eliminate collection costs completely by choosing our no cost secondary collections option.
- Enhance customer retention with no invasive calls during the electronic process.