We all know that it's true that a man with money is a strong man. A businessman can't be successful without a steady flow of cash. If everyone knows this secret, why are so many businesses failing? When you're running the day-to-day parts of a business, things like money aren't so clear. Here are seven tips that will help you make more money.
First, Cash and Carry. Try to build a business on a cash-and-carry model so you don't have to worry about getting paid. This is the best way to run a business, because customers will "pay when they buy," leaving you with only the money. Because collecting money takes a lot of time, you're almost forced to come up with new ways to pay. Set your rules from the beginning of your business so that your partners and clients will know what you expect from them.
- Permanent credit limit. Set up a credit account with a lender so you can keep a line of your money open. Even more so if the amount saved from early payment discounts is more than the lender's financing fee and less than what the supplier charges for late payment.
- Money that customers put down. Get a deposit from your clients before you start working. This will help you pay for the project's first costs. This way of getting money is being used by more and more businesses. It makes it less likely that they won't pay because you got some money up front.
- Be very strict about collecting money owed to you. Don't wait for your customers to remember to pay you. Go get your money when it's due. To run a successful business, you need to be a good manager, so make and follow a set of rules for collecting money. The harder it is to collect receivables, the longer you have to wait for them. To get your money, you don't have to be rude. All you need is a strong voice behind a stronger man. Setting a date for collecting payments is very helpful. After that date, you should send a follow-up statement 10 to 30 days later. Each business has its own idea of the best time to do business. You shouldn't send follow-up letters before 10 days after the date you set. Payment could be held up by the mail for up to 30 days. If your customer doesn't pay you within 45 to 60 days, you should call them to let them know. Accounts that haven't been paid in 90 days should go to the next level of collections, using a method you set up for this situation. Because time is money, every day that goes by means more costs for your business in the form of term ads.
- Keep your finds. Make a source of "hard time" funding. Most businesses have ups and downs in their activities, and it can be hard to keep track of cash in a good way. Put some money away when things are going well to help you when things are hard. We all agree that this sounds hard, but it's not. Just put a portion of what you earn each month into a savings account.
- Suppliers. Talk about terms with your supplier if you want to delay cash payments. Most of the time, you can put off paying until the end of the month or even for up to 60 days. This gives you a small benefit because you can use their money on your projects. Also, this delay will end (hopefully) when your clients pay, so you can pay your vendors. Some companies prefer the forwarding route, which lets you add more products to your list without having to spend a lot of money on new ones.
- Funding for receivables. Use a programme that involves funding from accounts receivable. Accounts receivable factoring is a very good way to keep the money coming in. Businesses that work with government agencies use factoring programmes a lot. If your clients are small businesses or individuals, it may be harder to use an accounts receivable funding programme because you'll have to take on more risks.
You might find all seven of these tips useful for your business, or you might only find one or two. Whatever you do to improve your cash flow will help your business, though. Sitting back and hoping for the best is the worst thing you can do. See how every store has a "CLOSED" sign in the window? They hoped, but they were wrong. Be smart, give it your all, and run your business like a pro.
