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10 ways to speed up your business cash flow

Ensuring regular cash flow is essential for small business owners, but can become tricky unless you have several active cash collection strategies in place.

Spending time managing slow or delinquent accounts can tie up valuable resources in a business which can be put to much better use!

Here are 10 easy ways to speed up your business cash flow:

  1. Sell off unused or obsolete business equipment, stock or assets: Rather than having an obsolete vehicle, piece of equipment or other rarely used business asset collecting dust in a shed or forgotten in a cupboard or old inventory sitting on a shelf, look to how you can quickly sell it. Have a sale, or list the items on Gumtree or eBay.

  2. Require deposits before commencement of work: Whether you run courses, provide a service, or produce made-to-order goods, request an upfront deposit or booking fee of 50% to ensure you have the funds available to carry out the work required.

  3. Build progress payments into work contracts: This is a common way of billing within the building industry, however progress payments can be applied for other services when work is done in stages.

  4. Be aware of and watch for 'scope creep.' Ask for contract payment variations as soon as possible: I often found this to be the case in my past life as an accountant. Whenever we recongised the need for additional resources to be allocated to achieve a specific outcome, it was important to discuss it with our clients as soon as possible and ensure they were happy to make the variation before we went ahead with additional work. Billing them extra and trying to explain why afterwards was problematic, and would often lead to disputed bills and slow payments.

  5. Offer payment by credit card as an option and small discounts for cash or early payment of accounts: Offering credit card as a way to pay will ensure any cash-poor customer on a tight budget can still make payments on time. Offering discounts can also provide an incentive to bring forward payment –and tells the clients that you are willing to offer them something of value in return for their willingness to make a quick payment.

  6. Penalise slow payers with interest payments and/or late payment fees: Another way to encourage customers to pay on time is to charge interest for slow payment, like credit providers do, or impose a late payment penalty charge. The slower the payment, the larger the penalty can be.

  7. Follow-up unpaid accounts efficiently with payment reminders: Don't wait for accounts to go beyond their payment terms. Send friendly reminders, via text message or email, before that happens.

  8. Use a collection agency to speed up collection of your accounts receivable: Sometimes a letter from a debt collection agency is needed to get a payment, especially when a customer is experiencing their own cash flow problems. It quickly helps them to prioritise paying your account if they're in debt and not sure who to pay first.

  9. Enter into payment arrangments with slow payers: Where it's evident that a customer can't pay in full on time, offer them a weekly payment arrangement. You can also incorporate an interest charge until the account is settled.

  10. Follow up existing customers and bring forward their purchases: Sometimes your existing customers have making a purchase from you in their mind, but daily life takes over and getting in contact with you to place an order just sits on their 'to do' list. Bring these kinds of purchases forward by being pro-active and following up with your customers right now. Call them and ask if they need anything.

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