Most individuals, who have never had a business of their own, think that owning one automatically means you’ve got cash.

People often think, “Sure, you could get the cheque because you could simply write it off.” But, do they understand that having a business of your own is the frailest balancing act of money management that anyone could possibly embark on?

The money we’ve got is as valuable as air itself, and writing things off doesn’t really mean free cash.

Of course, you would have heard the saying, “Cash is King” consistently and with a purpose. But, you’ll never really understand the seriousness of this message, until cash in your business becomes more than the king. It’d certainly become air and without it, your business could die!

You may go to your accountant and say that the year-end looks awesome and you’ve made some good money. But what if your accountant says that, though your financial statements show that you’ve made good money, there isn’t any cash and you need some soon?

As a business owner, it’s extremely crucial for you to pay attention to the cash coming in and going out. You cannot just know that your business is running out of cash and still remain quiet. They say that, “Ignorance is Bliss”, but, that’s true only till ignorance takes the shape of a “6 figure number”.

Starting a business isn’t everyone’s cup of tea, as one has to go through a lot of intimidating challenges. Also, it doesn’t really matter whether you own a large corporation or head a one man show, running out of dosh is one of the top ways in which a business could go under.

As a business owner, you shouldn’t be underestimating the significance of having sufficient money. With the present business climate, simply ensuring that your firm’s cash flow is sufficient is not always as obvious as it might sound to you.

Of course, you can opt for unsecured business loans, like cash flow finance, in order to make sure that your business doesn’t run out of money, especially when required. But, if you wish to look out for some other ways to bulletproof your cash flow, you’ve stumbled upon the right place.

So, here we have a few simple tips and tricks that would help you improve your business’s cash flow:

  • Keep an Eye on your Expenses

One of the most efficient ways to scrutinise your expenditure is to adopt and follow a clear and detailed financial plan. It does not really have to be intricate. If you have ever made a monthly budget to keep a track record of your personal expenses, preparing a plan for your business could be somewhat alike.

In this regard, it’d be best to seek assistance from a financial planner or a certified public accountant. Bear in mind to monitor your plan daily, and make adjustments or changes wherever required, all along the way. It’s really incredible how the expenses that fall through the cracks here and there, could tot up over a period of time.

Always pay specific attention to those recurring expenses on your credit card statement, particularly the ones that are unfamiliar to you.

  • Set Adequate Gross Margins

Whether you’re selling goods or services through your business, you ought to be sure to end up with sufficient amounts of profit, once you’ve covered all the expenses related to running the firm, like manufacturing materials, and wages.

There is always a standard formula to calculate your gross margin. Always start with your total revenue, then minus the cost of the number of products sold, and divide that amount by revenue in order to end up with an accurate gross margin percentage.

However, if you are not comfortable with calculating your gross margin all by yourself, you can get the job done with the help of some online tools.

  • Delay Paying Bills as Long as Possible

You should never take long to settle your bills. But, this may be a sound strategy if you wish to postpone the payments, until it is extremely necessary. When you cause delays, you tend to gain the benefit of keeping full control on your money for as long as you want, whilst you’ll still maintain a good credit with your suppliers and vendors.

Always think of negotiating with your vendors to get more favourable terms. Also, think of switching to vendors who accept payments through credit card, as it would later on give you a bonus of 28 days or so, in order to pay off your expenses without penalty. Moreover, if you have thought of paying the bill late, you ought to give your vendor a heads up first.

  • Issue Invoices on Time

As a business owner, you often get so caught up securing your new, potential customers, dealing with employee problems, completing projects before deadline, and a multitude of other daily hurdles, that you tend to overlook issuing invoices on a timely basis.

If you do not bill your customer, you will not be paid. So, bear in mind to issue invoices immediately. If at all the invoices are made on a recurring basis, you must commit to sending them out by a specific date each month.

However, if the invoices are based on the delivery of services or sales, then be sure that the accounts payable generates the invoices right away.

  • Offer Customers Payment Options

Try making it as easy as possible for your customers to pay for the goods or services they purchase from you. Also, make arrangements for your business to accept cheques, cash, money orders, cashier’s cheques, credit cards, online payments, or withdrawals.

Think of setting up your payment plans so as to make it easier for your customers to provide you with monthly payments. Not only be mindful of several expenses and charges linked with every payment option, but also weigh the expense and advantages of offering several options as opposed to the extra costs.

  • Ask for Progress Payments for Longer Projects

Progress payments, also known as instalment payments, are made periodically over the course of a bigger project, typically after some milestones are acquired. These payments are preferable for each and everyone involved. As a business owner, you don’t really have to wait until your project is completed for you to get paid.

In this manner, your customers could make more affordable and smaller payments along the way, after they’re completely satisfied with how the project is progressing.

If you are buying materials from a vendor or making use of a sub-contractor in order to complete the project, you must ask if you could make payments all through the project’s duration. This way, you’ll be able to make payments as you get paid.

  • Pay Commissions based on the Invoices Paid

If you’ve got employees that are being paid on a commission basis, keep in mind that you need to compensate them on the basis of paid invoices, instead of billed revenue.

This makes complete sense from a cash flow viewpoint, wherein you will already have the cash in bank well before writing the cheques. However, one “not-so-obvious” benefit is that, it’ll keep your employees focused on the significance of cash flow.

  • Keep an Eye on Labour Costs

Employees are crucial to your business. But, a small business might require keeping labour costs as low as possible. So, ensure that you’ve got adequate amount of employees to get the job done, but not too many. The last thing you’d want is idle employees being paid for doing very little.

To sum up, you must do everything you can in order to decrease your company’s turnover rate. Remember, hiring and training new employees is time-consuming, expensive and a daunting task.

You should always cross-train your employees as much as possible, so that they could fill in for others when required. Think of recruiting temporary employees on a per-project basis, in order to prevent the cost of payroll taxes and other benefits that would add up quickly.