Every day new entrepreneurs toss their hat into the ring of business ownership. Yet, at the same time several new businesses die off. After having spent considerable time refining their business plan, business owners are often left scratching their head, trying to figure out how, after dedicating so much time to innovative product development, or service structure, their company could suffer such a fate. In a majority of cases, the answer is easy: lack of a steady cash flow. Next day funding can be essential in keeping your cash flow boat moving forward successfully.
For any company, big or small, cash flow is the key to success – trying to operate a business without managing the cash flow is like attempting to paddle a boat upstream without any oars. Even if you are successful, the effort will eventually wear you out. As a business owner, you may be focused on profitability, but if you can’t efficiently manage your cash flow, you are likely to fail, and probably will not survive a second year. Your company needs continuous access to cash in order to meet payroll demands, pay your bills in a timely manner, and keep your business growing and moving in the right direction.
The three key cash flow elements you need to analyze and manage include:
- Accounts payable (AP): The amount you owe your suppliers.
- Accounts receivable (AR): The amount your clients and customers owe you.
- Shortfalls: The difference between your AP and AR balances, not counting profit projections.
Managing Your Cash Flow Efficiently
There are a variety of ways to keep your business afloat, including strategic payroll funding solutions, next day funding for point of sales, software and mobile app cash flow tracking, appointing a cash flow monitor, and more. Here are four essential tips to keep your cash flow boat moving forward successfully:
- Maintain some cash reserves. You should expect to experience periodic cash shortfalls, but your company’s survival hinges on how well you maneuver when you experience a shortfall. By starting with cash in your account, and carefully managing what comes in and goes out, you won’t stress as much when you do experience a temporary shortfall.
- Opt for next day funding for credit card processing. Waiting for two, four or even more days to receive daily transaction batch payments can strain your resources and reduce your flexibility. When bills are due, being paid for today’s transactions tomorrow can often be the difference between paying bills on time and incurring costly late fees.
- Collect receivables immediately. Try to avoid net-30 and net-60 contract terms whenever possible. Assign a member of your team to keeping an eye on receivables due, and contact customers frequently to collect payments as soon as possible.
- Extend payables whenever possible. While you want your receivables to arrive quickly, in contrast, you need to arrange the best deal possible for payables deadlines. Negotiate for net-60 or net-90 contracts, if you can. Don’t pay everything at once if you don’t have to. It’s okay to have anticipated payments figured into your budget, and to write all your checks at once, but don’t send them out until they’re actually due. Some suppliers charge late fees, however, so make sure you pay on time.