Small Business Cash Flow Management: Six Tips

by | Accounting and Cash Management, Cash Flow Management

Real estate investors claim that you actually make your money on the way in. That is, you put yourself – and your investment – in a position to succeed by making sure you don’t pay too much for a property.

The investor can’t control what happens to the real estate market after he makes the purchase, but he can – and does – control his initial purchase price, which limits his downside and positions him to benefit should the market move higher.

This lesson can be applied to small business cash flow management. You can’t always control your customers, your suppliers, or other circumstances outside your company, but there are things you can control that can make effective cash flow management easier and help your company grow and prosper. Here are six tips for better cash flow management.

1.) Negotiate Better Terms with Suppliers

Don’t fixate too much on price. If you can find a supplier with better terms (e.g., net 60 instead of net 30, or 90 days same as cash), it might be worth paying marginally higher prices. This is especially important when your company is new and if you’re consistently being paid late by your own customers.

Of course, getting better terms from a low-cost supplier is better still. Don’t hesitate to ask.

2.) Insist on Deposits on All Orders

This is almost always justifiable, even from the customer’s point of view. You need the deposited funds to acquire material, equipment and labor to fill the order, right?

As a bonus, it becomes much more difficult for the customer to cancel an order once an initial payment is made. (That’s not to say that you shouldn’t do so, if the customer requests it. If you don’t, it might be the last order you ever see from them.)

3.) Investigate Alternative Methods for Acquiring Equipment

There are benefits – from a tax perspective, for instance (talk to your accountant) – to buying equipment for your business, but an outright purchase that saddles your growing company with another payment and severely impacts your cash flow, even in the short term, may not be a good move.

Options for renting, leasing, borrowing and even sharing equipment became more popular during the recent economic downturn, and some business owners continue to use them.

And used, refurbished equipment can be an attractive, lower-cost option, especially for equipment that is not expected to be in service for long, or that will be used only occasionally.

4.) Use Electronic Payments

For your company’s invoices, offer – or even require – electronic payment from customers. Your bank can arrange this for you for any commercial account.

Fees can range up to 3% of the invoice amount, but can be negotiated down if you have significant volume. In total, when considering time in the mail and time for clearing a paper check, cash flow can be accelerated by up to five days.

5.) Offer Discounts for Early Payments

But be proactive. Ask your customers’ purchasing agents if they’d be interested in a small discount (usually 2 to 5%) in exchange for earlier payments (due on receipt, for example, rather than net 30). Some companies even have policies that require them to take you up on the offer.

To kick-start the program, consider additional incentives for sales reps that effectively promote the discounts to their customers.

6.) Use Invoice Factoring

Factoring can help you get cash from your receivables within just a couple business days of sending an invoice.

Companies in hundreds of industries from countries all over the world have used invoice factoring to stay current with their payroll, taxes, and overhead expenses, and also to invest in what they need to make their businesses grow and succeed. Contact MP Star Financial to learn more.


Stop waiting 45 or 60 days for payments! Call MP Star Financial for more information. (800) 833-3765, extension 150.

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For more specifics about invoice factoring, visit MP Star Financial online or schedule time to talk with a representative. Don’t wait 30 to 45 days for payment. MP Star can get funds to your account faster. Call MP Star Financial today at (877) 292-1904, extension 150.