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3 Expert Tips to Keep Your Business’s Cash Flow Consistent


May 13, 2019

Consistent and predictable business cash flow is a must if you want your business to grow and succeed. In fact, 82% of all business failures are linked to poor cash flow management. That’s a statistic you can’t afford to ignore.   Fortunately, there are some practical steps you can take to even out your cash flow and ultimately, increase your profits. Here are three things you can do right now to increase your cash flow and get your business on the right track. 

Business Cash Flow Solution #1: Offer Prompt Payment Incentives 

One vastly underestimated and a potentially effective strategy of ensuring that you have consistent cash flow for your business is to incentivize your customers to pay you in advance or on time. The most common way to incentivize rapid payments is to offer your customers a small discount if they pay quickly.   For example, you might change your terms to 1%/10 Net 30, which means that the customer is entitled to take a 1% discount if they pay the invoice within 10 days, and the full net amount of the invoice if they pay in 30 days.  Offering a discount may speed up your cash flow. However, it’s best to offer discounts to reliable customers who mostly pay on time. If you offer it to everyone, you may find that people pay late and still take the discount.  If you’re careful about offering discounts, you can even improve your business cash flow and reduce the amount of time you spend collecting invoices, too.

Business Cash Flow Solution #2: Align Vendor Terms with Client Terms 

The second thing you can do to even out your cash flow is to compare the terms you have with your vendors and the terms you have with your customers. If they don’t match, you may be setting yourself up for serious cash flow problems every month. 

For example, if your invoices have Net 30 terms, and your vendors require you to pay on receipt, it means your cash flow is perpetually out of sync.  

Not every vendor will agree to change their terms, but it’s worth your time to ask. Even bringing the terms a little closer together – for example, getting 10 days to pay instead of paying on receipt – can help you even things out. 

If your vendors won’t change their terms, you’ll have to figure out how to keep the cash flowing without being delinquent on your payments. Some vendors offer a grace period. You can take advantage of that time to give yourself some breathing room. And, of course, you can use this solution and offer incentives to your clients – a combination that can bring your due dates closer together.

Business Cash Flow Solution #3: Consider Invoice Factoring Companies 

Finally, invoice funding, also known as invoice factoring, can provide you with even cash flow and may act as a good safety net, even if your business’s cash flow is relatively consistent. Invoice factoring companies provide companies with cash advances for their unpaid invoices and can minimize the risk of long-term or significant business cash flow problems.