Smart Ways Of Cash Flow Management For Small Businesses

One of the most difficult and challenging aspects of small businesses is cash flow management. Having continuously nudging customers for paying, take the valuable time of people along with can be really disheartening. Indeed it is tiring! If you are also exhausted of consistently being on such a journey of chasing customers for payments, you definitely need to consider these few tips of ways to improve the cash flow for small businesses.

1:   Make Use of Tools That helps To Stay On Track

Keeping a constant track of the available cash along with expected outflow and inflow of money throughout the entire month can be a crucial step for managing the cash flow. Even when it is a great step, it can really become time-consuming for any busy business owners.

In order to get over this tedious and tiring job, all you need is to make use of the online cash-flow management tools. There are numerous options open for you like UpYourCashFlow, Pulse, Float or Cushion. Ensure making in-depth research on these tools and use one of them as per your business requirement and budget.

An eagle’s eye on the cash flow is one of the preliminary steps of improving the small business cash flow.

2:   Open Several Modes of Payments For Customers

While examining different ways to speed up the cash flow or looking for ways to enhance small business cash flow, you need to find ways to speed up customer paying procedure.

You really cannot force your customers every single day, the only thing you can do is to find out different other payment options like credit cards, Automated Clearing House (ACH) or debit cards. Also take into consideration about the mobile payment or digital wallet solution like Apple Pay, PayPal, Venmo, Square and even Bitcoin.

The more options you open for your customers, the faster and timely cash you can observe appearing on your account.

3:     Check the receivable to the payables

One of the most common things where owners hardly pay attention is to check the payment terms for the suppliers along with comparing those with the customer payment terms. Make sure you pay attention to enhance the small business cash flow.

In case it is necessary to pay the supplier within the next 30 days and you are giving your customers the time of paying within 45 to 60 days, it is creating a break in the cash flow. When you are looking for better cash flow management procedure, you definitely need to focus on it.

Don’t forget to match the terms of payment with the suppliers to the customer terms. Also, consider checking the penalties for late payments. Make sure you take the same step for the customers in order to stay away from late payments. This will make sure that your suppliers are getting the amount on time along with you can easily keep an account on the cash flow.

When it comes to cash flow management, make sure you keep a track on everything. You will definitely find some customers who are habituated to late payment, to maintain the cash flow consider late payments fee. Moreover, you can also opt for working capital loans if you don’t have enough funds for your small business.

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Questions To Ask While Choosing the Right Factoring Company

While there are myriads of other aspects that you require your attention when it comes to businesses, choosing a factoring company is one such essential decision. Only when you select a good factoring company, will it ensure maintaining the cash flow along with business growth at the same time. On the other hand, a wrong choice can leave you in a worse condition.

Factoring is not something new, it has been around for centuries. But are you thinking, why haven’t I heard of it previously? Well, it has been in the limelight as an authenticated source of cash flow for the last few decades. When it comes to securing financial needs for business, small business loans is the most legitimate option, but not every business can get a loan. With the invoice factoring, small business owners get an opportunity to maintain stable cash flow. Sound great, doesn’t it?  But how will you understand which factoring company is apt for you and your business?

With the rise in demand for cash flow, many companies are coming forward and hence, choosing becomes a daunting task. The simplest way to dig-in is by understanding what the company is offering and how the services they are offering can become beneficial for your business. Well, to be on the safe side, you need to ask some questions in order to comprehend whether they are the right choice or not.

Here are the top questions:

What is the application procedure for the factoring company?

Generally, most of the companies ask to fill their online application. The application includes filling some necessary details and attaching documents. Some of the most common information that you need to fill-in is your name, for how long have you been in business, ownership information, and amount of receivables, accounts receivables, payable aging and Articles of Incorporation.

Does the factory company have enough resources to expand with you in your future?

The only purpose of factoring companies is to allow businesses to have cash flow now and in their future and help them to expand. You need to choose a reputed factoring company that can support you now along with future funding needs. Make sure you ask them about it, as it helps to start with the right partner and never look back.

What are the fees and advance rates?

Fees and advance rates of a particular company depends a lot on the industry. The genre of your business makes a difference. Typically, the factoring company earns profit from the fees — a decent percentage of invoice’s face value. As mentioned earlier, it can vary from 0.8-3.0%. The advance rate charged by them is the invoice’s percentages that the company provides you upfront. These advance rates vary from 75% – 90%.

Are there any hidden fees?

There are factoring companies that might charge a minimal fee for their different types of services. Some of the most common hidden fees include due diligence and application fees, annual fee, origination fee, wire fees, chargebacks and early termination charges. Make sure to ask about it before choosing.

Asking questions and getting insight into the factoring company can lead you to take the right direction. When it comes to securing small business funding, factoring companies can be a great choice. Analyze thoroughly and choose before making a decision.

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