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| How to maintain a steady cash flow? |
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How to maintain a steady cash flow?
For any business to be successful the most important factor is
availability of ready cash and maintenance of a healthy cash
flow. However, during day-to-day operation of business it is
often found to be the most difficult task and every year a big
percentage of the small businesses close down for lack of ready
cash. Here are some tips that are really effective for small
businesses to maintain a steady cash flow.
1)Incentivize Payment: If you are into one of those
businesses where the clients tend to defer payments, try to
introduce an incentive scheme for immediate payments. If
customers would pay at the time of purchase you would not need
to worry about collecting receivables and the cash flow will
also be maintained at its best.
2)Credit from Vendors: Try to negotiate terms with your
vendors and suppliers to get an extended credit period so that
you don't need to pay promptly for your purchases. This will
delay the outflow of cash from your accounts and less money will
be trapped in your inventory. There are suppliers who would even
offer a 60-day credit period and with such an extended period to
pay you will hopefully have your receivables collected from your
customers and use that to pay the vendors. This way you will not
have to shell out your own cash or spend very little yet
maintain proper supply of your raw materials.
3)Account
Receivable Factoring: Factoring of accounts receivables
is a very popular and affective way to maintain a healthy cash
flow. Businesses that have long gestation period before the
receivables could be converted to cash can always factor their
receivables to get ready cash as per their requirements. It is
particularly easy to factor your invoices if you are dealing
with big companies or government agencies because the factors
are more willing to take risk with invoices due from large
corporations than with small businesses.
4)Ask for Advance: If you are in a business where you
provide custom made goods to your customers as per their orders
you can always ask them for an advance at the time of starting
the project. This would reduce the risk of nonpayment as a part
of the payment is already realized. Also, a healthy cash flow
can be maintained very easily if you can negotiate a term of
periodic payment with the customer, so that the customer pays
you in parts as you progress with the project.
5)Savings Fund: Most businesses go through seasonal
changes in sales volume, sometimes its good and sometimes it is
slow. It is a very good practice to keep away a certain
percentage of the total revenue in the savings fund that helps
to operate and run the business smoothly during hard times.
All of these tips might not be applicable for your business,
however, most of them are and with some effort and strict
control on your business practices for few months you can get
these things incorporated into your business policy. Once you
have done that, you have won half the battle, because these
principles are sure to increase and enhance your cash flow
thereby helping your business to grow. So if you are still
concerned about availability of cash, start working today and it
wont be long when your business will have a healthy cash flow.
About the author:
This article is written by Ray Smith, a marketing expert with
years of experience in different industries and specialized
knowledge on branding and Internet marketing. Factoring
Financial Services
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| Category
branding online products |
Author
David Gabbitas |
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