Cash flow is a tricky and delicate balance that each small business owner needs to learn individually. Every business is financially similar to other businesses, but also importantly different. The strategies you use to manage the cash you have on hand may not be the same solutions that other small businesses use. But no matter what works and what doesn’t, you need to find some way to cover your expenses.
The following are some cash flow management techniques you should consider in the context of your business:
ACH Payment Options
If you find that your customers have asked for Automated Clearing House payments, often used for repeated payments over extended periods of time, perhaps it’s time to make them part of your service.
It will take some adjusting to, particularly learning to give and receive important banking information in a secure way. However, talking to your bank can streamline a lot of this initial work. In exchange for that setup, you will be able to receive automatic payments on-demand from regular customers instead of tracking lots of Accounts Receivable.
Cross-Sell and Up-Sell
It may not be something you think about often, but acquiring and serving a customer costs your business money. Not just raw materials money, but money on marketing, time, employee wages, and more.
Every time you can sell another product or service to someone who has already bought, you get more profit from that interaction than from a new customer, because they are already “pre-sold” on doing business with you. And here’s another sales-psychology tip: people who have just bought something from you are much more likely to buy again...right now. That’s why car salesmen try to throw in all kinds of extra protections and coverages right after you sign on the dotted line for the new car. But if it works for them, why not make it work for you?
Minimums for Invoicing
If a customer asks to be billed instead of paying on the spot, you just made less money than you could have. There are costs for invoicing, even though they may be minimal. The more of your customers request invoices, the more these costs stack up.
To help avoid these costs cutting into your profitability and your cash reserves, you should set a minimum amount for any transaction that can be invoiced. That way, customers doing small transactions pay upfront and contribute to the cash you’ve got on hand.
Mobile Credit Card Payments
For small businesses that move around, being able to accept and process credit card payments through a mobile device is a must. Trade show goers, plumbers, contractors, the list of businesses that can improve their cash flow with mobile payment goes on and on.
There are a plethora of options available now that can be synced to a phone, tablet, or other device and keep all your records for off-location transactions together with your regular transactions.
Partial Payment Upfront
Similar to the invoicing minimums, you can reduce the impact of late payments and uncollected Accounts Receivable on your cash flow by requiring some percentage of the payment (or a flat down payment) upfront.
This works well in conjunction with minimum invoice transactions. Using both guarantees that you always get some cash upfront, so you’ve always got some in the bank to cover your expenditures.