1. Lower Your Outgoings: It is actually one of the easiest things that you can do. Look at all the outgoings that you need to make, including rent, gas and electricity and your internet and shop around for somewhere that will offer them for less. Do the same for your supplies and any other outgoings that you have. By finding them cheaper, you will not need as much money to come into your business. This will help you make a bigger profit at the end of the year! If you have contracts with people, consider talking to them about lowering the cost to avoid financial problems.
2. Improve Your Payment System: Accept payments via credit or debit card and improve the way that you handle your finances. One of the biggest problems for some companies – especially the smaller ones – is the way that they handle payments. They agree to invoices being paid after the work is done and then the customers run away. It is expensive to sue and take other legal steps to recover the money and is not always worth the hassle. Instead, change your invoicing by taking 50% of the invoice upfront and the rest upon completion (for example).
3. Change the Dates of Payments: Can you look at changing when the payments go out? This means that you can take more control and make sure the money is in your account before it has to go out. While you may have the option of credit cards or a business loan, they cost extra money due to interest and aren’t financially worth it. Most companies will allow a change in the date a payment is taken.
4. Pay Twice a Month: Instead of paying the full payment at the start or end of each month, look into whether you can make two payments per month. This can help to control your finances more and is often easier trying to get a smaller amount together in time. Even landlords may accept bi-monthly payments on the rent, as long as the full amount is paid each month.
5. Only Pay When You Need: Many people opt for paying a bill early to get it out of the way but this could actually cause problems for your cash flow. Look at the date when the bill is due, note the date on your calendar and then file the paperwork. Only pay when it is due. There are some bills that have no penalty for a late payment so you could opt for that if you really need to – but only if you really must! Those that have a discount for early payment are worth paying on time so that you can save money.
Cash flow is essential. No matter how great your profits are, if you have bad cash flow your business will struggle. Your creditors don’t want to worry that they won’t get a payment from you and are often bigger companies that can use legal methods much easier than you. Take some time to implement steps to improve your cash flow and help your business avoid the prospect of administration or liquidation.