If you are a business owner, then you are always looking for ways to increase your sales and improve your profit margins. Even if you’re currently generating good revenue with your company, you need to stay on top of your financial activities so your top line doesn’t get adversely affected by cash flow problems.
Here are some ways to strengthen the cash flow of your company and increase your earnings.
1. Instead Of Buying, Start Leasing
You can face cash flow problems if your debts or payables are due before you have collected your receivables or the money from sales of products or services. Having cash flow problems in a business negatively impacts the company’s reputation and standing when it can’t pay bills on time, delays payroll leading to higher employee turnover, and faces questions about creditworthiness.
One way to improve your cash flow is by leasing supplies, real estate, and equipment instead of outright buying them. Leasing might be more expensive in the long-term than buying these, but unless you have a large cash reserve, it’s better to lease and maintain a regular cash stream, so you pay for your daily operations.
Leasing is more beneficial for companies as this allows them to pay in small installments, which improves cash flow. You can also add your lease payments as a deduction on your business expense, thereby saving you money on taxes.
2. Conduct Extensive Credit Checks and Offer Discounts to Customers
If a customer is unwilling to pay in cash for buying your products or services, conduct an extensive credit check on them before authorizing their purchase. Ideally, you should perform a credit check on every customer before you allow them to sign up.
Customers who have poor credit won’t make timely payments, which will hinder your efficient cash flow and cause monetary problems. If you’re allowing a customer to make the sale despite having questionable credit, then ensure that you’re setting them up with high credit so you can recover extra money on late payments.
Moreover, offer discounts and special incentives to customers who will pay their bills ahead of the due date. When you receive cash early from your clients, this boosts your cash flow.
3. Go Through Your Inventory
You should regularly go through your inventory to see which goods and materials you are buying that are not selling at the same speed compared to other products in your company. This will help you see where your cash is being tied up and how you can free it.
Instead of buying larger quantities of products that don’t sell, remove them from your list or try to get rid of them quickly by offering them at discounted prices.
4. Maintain Good Relationships with Suppliers
Your suppliers play a crucial role in your business’ success, and you must establish friendly and courteous relationships with them. Remain in regular communication with all suppliers and ask them for discounts on early payments.
You have to be good at negotiating and make your suppliers see how the discounts will be a win-win situation for both of you. Learning to persuade others is an important aspect of a good business deal and will help you get better terms from your suppliers.
If you’d like to consult with an experienced tax professional about the cash flow management of your business in West Palm Beach, Florida, then get in touch with us at Advance Tax Defense and Accounting. We are a tax planning firm in Palm Springs, and we offer many services, including bookkeeping, financial planning, payroll processing, and more. Contact us today.