Top Cash Flow Management Tips
As a business owner, you know how hard it can be to manage your cash flow. You need to make your business offerings appealing to potential customers while also managing your revenue and expenses in a way that brings more capital in to the organization.
Every dime is important to a business owner. You need to be able to invest in your infrastructure and thrive in the industry. Furthermore, cash pays the bills and pays your employees—needless to say, knowing how to handle cash in a way to make the most out of its inflow and outflow is critical.
Let’s dive deeper into the top cash flow management tips so you can manage your organization’s cash like an expert.
1. Consider Invoice Factoring
If you’ve been in business for a while, you may have come across the term invoice factoring (also called accounts receivable factoring or accounts receivable financing).
Invoice factoring has the potential to greatly change the way your organization handles its finances. If you operate one of the many businesses that provide a service or product and invoice your customer afterwards, you probably have to wait 30, 60, or even 90 days to see that payment due to your customer’s payroll process.
The downside to issuing invoices comes when you need cash to run your business in the meantime. The most common solution has been to take out loans to cover the necessary costs until your customers can pay. However, taking out a loan can quickly make your financial situation worse: from high interest rates and an additional monthly payment to accumulating debt and affecting your credit line. Loans won’t solve your cash flow crunch.
In an ideal world, you could ask your customers for payment ahead of time, but it doesn’t work like that when you’re in an industry that relies on payment term agreements. You can’t force your customers to pay you whenever you find yourself in a cash crush, especially when you and your customer agreed to a certain gap between the point you provided your services and the point you get paid. If you try to collect from your customer earlier than agreed, they’ll likely look elsewhere for their needs.
That’s where invoice factoring comes into play
When you need quick cash for the services you’ve already provided or the products you’ve already sold, you can sell those invoices to a factoring company. Selling your invoices to TBS Capital Funding—a leader in the invoice factoring business—provides you with instant cash to use on what’s most important. Whether that’s paying your employees, purchasing material for a new project, or investing in new technology for your business, you have the working capital you need… and have already earned.
When you’re able to access your hard-earned cash without having to wait for months to get paid, you’ll stay ahead of the competition while releasing all the worry and stress that accompanies chasing invoices.
2. Prepare for the Future
The road to having a successful business isn’t smooth; it’s filled with speedbumps and hurdles that make achieving your goal a potentially difficult process. A talented business owner never underestimates these hurdles and is always prepared to face them. The best way to overcome a financial hurdle, for example, is to prepare ahead of time. But how?
To anticipate future financial shortfalls, you should analyze your balance sheet and cash flow records continuously. If handling money isn’t your strong suit, find a reputable accountant to oversee your financials. If you (or your accountant) see any financial crisis brewing, don’t ignore it. Make a plan to handle the situation before it becomes a full-blown catastrophe.
How to prepare
There are various ways you can prepare for a financial shortfall. First, you can try to build a strong working relationship with a local bank. That way, as soon as you see a cash flow crunch coming, you can talk with them about your options and make a reasonable choice. No one wants to walk into a random bank asking for money in a panic. Plus, waiting and waiting until your cash flow issue is harming day-to-day operations means you may be too late.
Second, you can try to set up an aggressive savings plan. If you work in an industry that has clear highs and lows, talk with your accountant or a financial planner about ways to save during the high times so that the low times don’t hit as hard. It’s easy to get caught up when money is flowing in strong, but it becomes a rude awakening when that flow stops and you didn’t prepare.
Last but not least, you can sell your invoices to an invoice factoring company like TBS Capital Funding. Invoice factoring is a smart way to keep your cash flow steady and reliable. The last thing you want is to get swallowed by a financial crisis while you’re waiting to get paid for work you’ve already done.
3. Expand Your Network
When you’re on the brink of a financial crisis, it’s not the best time to get in touch with a new lender or investor. If you contact a lender or investor for the first time when you’re in front of a financial shortfall, your pitch won’t look very appealing. They’ll see someone who’s on the brink of going down, not a business worth investing in.
A good cash flow management tip is to build your financial network beforehand. Make friends and contacts with investors and lenders before you need their services. Doing so will let you prepare for any future financial hurdles effectively.
Furthermore, when you’ve nurtured relationships with investors and lenders before a cash flow crisis hits, they will probably be more comfortable putting money into your business when you need that extra help. No guarantees, though.
The Bottom Line
Cash flow management is a crucial element of success for any business. And managing cash effectively isn’t always easy; it can be a tedious task that poses a lot of challenges.
We’ve walked through the top three cash flow management tips you can use to manage your cash flow in the best possible way. Using these tips will keep you financially stable and able to fight financial crises, ultimately leading to long-term success.
And remember, TBS Capital Funding is here for you. Invoice factoring is the simplest, fastest way to get the money you’re owed by your customers—without having to wait the typical 30 to 60 days. Even if you’re not facing a cash flow management issue at the moment, tuck us into your pocket as a future resource!
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