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Are you experiencing cash crisis? Are most of your cash blocked in inventories and non-liquid assets? In today’s world, the use of the digital transactions is quite popular. However, businesses still need to have sufficient amount of liquid cash in case of any emergencies. If pure cash is not possible, then assets that can be quickly converted into cash should be present. Lack of cash or liquid assets can affect the smooth functioning of business transactions and therefore, you must improve your cash flow for the same. So how do you improve your cash flow? Here’s what you can do.
1. Mention The Payment Terms
When you enter into a transaction with your debtors, make sure you specify the conditions for making payments. In the case of a delayed payment, you can charge the interest to your debtors. As a result, debtors would ensure payments are made as per the due date. Similarly, you can reduce the credit period by offering rebates or discounts to debtors who make early payments. However, care should be taken that early payments are made at least a week or a month in advance and not just a few days before the due date. For this purpose, it is important that your debtors are aware of the payment terms.
2. Invoice Immediately
As a professional, you should invoice your debtors immediately after the goods or services are provided. This is best applicable when there is no credit period for transactions carried out. For transactions on a credit basis, you can still invoice your debtors in advance and expect the payment to be made on the due date. Accordingly, you can send a reminder message when the due date arrives. Do not delay the process of invoicing and wait for the end of the month. This would mean no cash inflow for the particular time period and moreover, if you do not have a bookkeeping system, you may even forget about the payments collection.
3. Deposit Immediately
When you get paid, deposit the checks immediately. Do not keep waiting for other payments to come along and deposit the money in the bank later. Timely deposits ensures that there is a continuous inflow of cash in your bank account and thus, helps in improving your cash flow. If you delay, there is the possibility of a bounced check if the debtor does not have sufficient cash available with him. Thus, the quicker you deposit, the better it is. The cash is readily available in your bank account whenever you need it.
4. Make use of Online Payment Options
Most businesses use online platforms to make payments. It is quick, safe and easier to transfer funds easily. Moreover, there is a real time gross settlement of transaction that is taking place. Some of your debtors may be comfortable in using these online payment options and if you hesitate in accepting these payment mechanisms, then they may ask for a longer credit period from you. Thus, your working capital can be affected.
5. Forecast And Plan For Future
The seasonal business trends can slow down business activities and transactions may reduce. As a result, you may not have sufficient cash to make payments to your creditors or your employees. Therefore, plan for these trends and ensure that sufficient cash is available to overcome any cash crisis. Do not keep all your money rolling in the working capital and keep some cash aside to assist you in difficult times.
There are some cash hacks that you can use to improve your cash flow. If you need assistance in order to deal with cash flow problems, it is recommended to take the help of a professional accountant firm in Edmonton. The professional accountant firm would not only help in improving the cash flow but would also suggest some tips to improve the overall efficiency of your working capital and get more cash inflows in your business.