Tips For Managing Your Business’s Cash Flow
At My Fiscal Office, we know how challenging cash flow can be for our clients. Here are some tips on how to manage your small business’s cash flow.
Know when to use a certain payment method.
Sometimes, it might make sense to pay a fee or bill with one form of payment over another. Checks, for example, can take time to mail and process (sometimes between 10 to 14 days), which may temporarily benefit your cash flow. But if you’re trying to make a payment by a certain date, you’d need to keep this timeline in mind. I’ve found paying by check can also help the recipient feel secure, as they can know they were paid on schedule, even if they haven’t picked up the check yet. For a few days, the money is just in the payer’s bank account; this money serves as an arrangement between the customer and the recipient until they collect and deposit the money.
But sometimes, writing a check isn’t feasible, especially for small businesses that have a suffering cash flow. On these occasions, you might need to pay your vendor with a credit card. Of course, it’s important to keep in mind that credit cards can sometimes charge additional transaction fees. Companies should also ensure they don’t make any delinquent payments and that their vendors accept payment by credit card.
We have been using Melio in Quickbooks online for our clients. Melio allows you to pay each vendor via check or direct deposit AND you can decide to have the funds paid from your checking account or charged to a credit card for a small fee. This allows you to use a credit card to pay vendors who do not accept credit card payments.
Make regular deposits.
Cash management is a vital part of establishing and maintaining a company’s financial security. As “cash” is the prime driver used to pay liabilities (whether you’re an individual or a business), you must handle it effectively to maximize earnings.
The prime objective of cash management is to optimize liquidity while minimizing funding costs, so depositing all of your cash regularly will ensure you still have liquidity in your bank account.
Send invoices as soon as possible.
On a variety of fronts, ensuring invoices get paid on time is critical for any company. The most noticeable benefit is that it can benefit your business’s cash flow, though there are other advantages.
For example, I’ve found delivering invoices right away can help reduce the time it takes to receive payments. In fact one client came to use to help put together a loan package. We found that their invoicing and collection processes needed improvement. After getting them on track with invoicing and collection, there cash flow improved without having to go into debt.
Remember, you are not alone.
When managing your business’s cash flow with these tips, remember what works for your business, and listen to your internal and external business associates. Ask other small-business owners and founders in your network what they’re doing to survive the ongoing economic downturn. In my experience, simply asking a fellow business owner a few questions could help you navigate the challenges you’re facing right now.
My Fiscal Office LLC
77 Bleecker Street
New York, NY 10012