Generally speaking, it is easy for business costs to quickly escalate. Often, companies find themselves needing more employees or materials than they have the cash for, and the shortage can get in the way of growth.
Improving cash flow can make it possible to act decisively when there is an opportunity for growth or a chance for a business to improve product development. From insightful planning to invoice factoring, there are several ways to bring more working capital into your business on a regular basis.
Generate a Cash Projection
Look at data from the previous year to see how money flowed in and out of your business. You may find seasonal peaks and valleys, or a monthly ebb and flow that will continue to repeat.
List what you’ll need to pay for equipment, employees, facilities, taxes, and current loans. Then, chart customer payments and income from additional sources. For example, you might see that in June, your business often has a low number of orders, but in December, you receive a huge influx of cash. Use your projections to plan equipment purchases and new employee hiring.
Sell Unused Assets
Unused assets can become a burden to your business because of costs including insurance, maintenance, and loan payments. You may find more value in consolidating your assets in order to help grow your business.
Review the services you’re paying for to see if you could lower monthly bills. If your business has more phone lines, technology licenses, or service subscriptions than it’s currently using, cancel those you don’t need.
Review Client Payment Terms
Refine your company’s payment policies and clarify the new terms in writing on your invoices. Offer customers multiple payment methods so it is easier for them to make payments. Offer discounts for early or automatic payments to receive what clients owe faster and enforce interest payments or late charges for those who are slow to pay.
Vendors may be willing to agree to longer terms. If you have some who are willing to wait for payment, your business can receive payment for fulfilled orders before you turn over funds for materials.
Receive Cash for Invoices
Sometimes your best clients are also the ones that pay at the very last minute. Invoice factoring can provide quick cash when you’ve provided goods or services and are waiting for the agreed-upon compensation.
A factoring company purchases your company’s invoices for a percentage of the value of the invoices. You receive short-term working capital you can put to use immediately buying supplies, investing in equipment or paying employees.
When customers pay their invoice, you receive the balance of the amount minus fees. Invoice factoring provides working capital that isn’t solely dependent on your assets or personal credit. As long as you have qualifying invoices, you may receive funds much faster than you typically would with a traditional loan.
If you don’t have 30 to 90 days to wait for customers to pay invoices, Bay View Funding can provide cash in as little as 24 hours. Learn more when you talk to one of our financial experts today.