Managing cash flow for your small business is not all about managing and controlling expenses. Of course, a major part of cash flow is the money that comes into your business. While there are many forms of cash inflow, such as owner paid-in capital, loans, partners, and lines of credit, your main source of income is from your own sales.
Managing how you collect from your customers can be the key to maintaining a positive cash flow. Here are a few tips for managing your receivables:
Require Payment Upon Delivery
Payment for goods and services should be required at the time they are delivered or rendered. The quickest way to start a cash flow problem is by allowing too much credit and allowing customers to pay at a later date. Make it your main policy to collect payment immediately.
Accept Other Forms of Payment
Cash is king. While everyone prefers to be paid in cash, it is not always the choice of most customers. Nor is it easy or practical to carry around a wad of money everywhere. Thus, choose to accept other forms of payment including:
- Personal checks from local banks only – Be sure to have a return check fee policy for checks that bounce, and keep a list of those that do so you do not accept checks from those customers again.
- Major Credit and Debit Cards – While you may pay unwanted fees for credit cards, you may still increase sales with this type of favored payment. Accept Visa and Mastercard definitively. Discover and American Express are also dependable, but more expensive. Research vendor and bank fees for each credit card and the cost of a credit card merchant account and swipe device.
- Online Shopping Cart – It is easy to set up a shopping cart software on a website. Most web hosts offer simple shopping cart software free for most accounts. Check with yours and inquire with their technical support about setting it up for your website.
- PayPal – Many people are enjoying the ease and convenience of PayPal. You get paid immediately, and there is usually just a small fee that PayPal requires.
- Invoices – This method should only be granted to the most dependable customers who meet your credit qualifications. See Part 2 for more information on Invoices.
(Continued on Part 2) [create link to part 2 blog here]