A recent survey by Intuit QuickBooks highlighted the scale of this challenge for small and medium-sized enterprises, 57 per cent of which said they had experienced problems with their cash flow.
More than a third (38 per cent) of small business owners in the UK have been unable to pay debts because of cash flow issues, while almost one in seven have struggled to pay employees.
Chris Evans, vice-president and country manager at Intuit QuickBooks, said: “Cash is oxygen for small businesses and without it they cannot breathe. The combination of chasing invoices and bad payment practices means small businesses run out of accessible cash. This has a real impact on their ability to take on new work, pay suppliers, their employees or themselves on time.”
Given just how serious these challenges can be, all firms should be taking a proactive approach to managing their cash flow. Here are five steps that could help your company achieve its goals on this front…
Invest in thorough client credit checks
Your business might be keen to bring in as many clients as possible, but don’t rush into any contracts without conducting thorough credit evaluations first. These checks will help you gain assurance that your clients are able to pay for your services and have a good track record for keeping up with their payment commitments.
Be efficient with invoicing
You can’t expect clients to pay you promptly if you don’t send out invoices when you are supposed to. Make sure all invoices are sent out as quickly as possible and state clearly when you expect to be paid.
Leasing vital pieces of equipment and supplies for your business essentially means you are hiring them to use over a defined period, rather than buying them outright. While this will be more expensive in the long run, it allows you to free up cash that would otherwise be tied up in expensive purchases.
Use modern payment options
The range of electronic payment options available to businesses today can be particularly beneficial because they allow you to wait until the actual day a bill is due before making the payment. This offers valuable flexibility and control over your finances.
Negotiate with suppliers
Cash flow isn’t just about the revenue you have coming in from clients. By negotiating with your suppliers and building up strong, positive relationships with them, you can secure discounts and potentially save money by committing to long-term arrangements.
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