5 Easy Ways to Improve Your Cash Flow

Author: Alyssa Gregory | September 8, 2015

It’s common that a small business will experience regular cash flow ebbs and flows. While this is normal, it’s not optimal. The goal should be to make your cash flow as predictable and steady as possible to ensure that you aren’t scrambling to pay bills, make payroll, or worrying about making enough immediate income to cover a deficit.

Use these tips to create habits in your business that will help you manage your day-to-day cash flow more effectively.

1. Outline Payment Terms in Your Contract
You should use a contract as part of your standard business process in every project you undertake. This contract should outline the scope of work as well as clearly specify your payment terms and policies. If you are concerned about a client paying late, ask for a deposit and incorporate a late payment fee into your contract, so the client knows up-front what the penalties are for paying late.

2. Invoice Immediately
One way to create a more consistent stream of incoming cash is by invoicing for completed work immediately instead of waiting until a once-a-month billing schedule. It also helps if you provide multiple forms of payment options to allow clients to pay in a way that is easiest for them. This usually translates into getting paid in full on time more often.

3. Review Expenses Frequently
Monthly expenses can accumulate quickly in a business, and you may not even remember where they originated from or what you’re paying for. Take some time every couple of months to review your accounts and see what you are paying out every month on business expenses. You may be surprised what you can eliminate to cut down on expenses.

4. Spread Out Bill Payments
While it may be more efficient to pay all of your business bills at the same time every month, you may be putting unnecessary strain on your cash flow. Instead, set 2-3 times per month to pay your bills to spread out the frequency of outgoing cash. You should also prioritize your bills in order of importance, so your most important expenses are taken care of first.

5. Use a Budget…Consistently
The only way to stay in tune with your cash flow is by using a budget on a regular basis. Your budget should include a running list of anticipated income, anticipated expenses, and your current cash position, generally on a yearly timeframe. Once you have a yearly budget, you can update it on a monthly basis to get real-time cash flow information. These tips will help you create a budget for your small business.

Keeping your cash flow healthy is an important part of keeping your business finances strong for both the short-term and the long-term. Once you solidify these cash flow-friendly habits, it will become even easier for you to manage your business finances and stay ahead of your expenses.

Alyssa Gregory is a digital strategist, content marketer and small business consultant with more than 15 years of experience helping businesses reach and engage with their target audience. In 2011, she founded the Small Business Bonfire, an online community for small business owners that also includes a blog and weekly small business newsletter with actionable tips and advice.

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