Ways to improve your cash flow

Beth VadeBonCoeur,
Accountant

Cash flow is the gasoline that makes your business run. When you have positive steady cash flow, your business can run smoothly with no delays in paying vendors or worries about paying payroll. But when your cash flow is slow or negative, it is hard to continue to operate a business. These steps can help improve cash flow for any business.

1. Invoice promptly – The quicker you invoice your customer after the service or product is delivered, the sooner you will receive the payment.
2. Consider giving a discount for quicker payment – Many businesses offer a discount for early payments. This can help improve cash flow. A 1 to 2% discount, if paid within 10 days, is a common business practice.
3. Actively work on collecting past due accounts – The tasks of identifying past due accounts and following up with phone calls or letters need to be done on a regular basis.  
4. Control inventory levels – Keeping inventory levels at an adequate and consistent level can help keep cash flow more even. Try to reduce excess inventory. Try to purchase inventory in smaller batches more often instead large purchases less frequently.  
5. Pay bills only when they are due - Pay your bills according to your vendor’s payment terms.

These are just a few suggestions to help your business with cash flow.  When your business has good cash flow, you can respond faster to opportunities and resolve unexpected problems that occur.

This article originally appeared in Trigard Tuesdays, our weekly electronic newsletter featuring information for the funeral industry. Sign up for your free subscription at http://www.trigard.com/tuesdays.