How to Turn Cash Flow Into a Steady Stream
A business simply cannot survive without a constant cash flow. Debt payments, payroll deposits, inventory purchasing and property investments all require cash on hand. While business sales are what is going to bring money into your business, you can make the most of your earnings to have the most cash available as possible. Here are five practices to employ that will keep the cash flowing.
1. Use a Deposit System for Custom and Large Orders
By taking some payment up front, you not only add to your cash flow earlier than you would if you waited to collect payment at the delivery of the order, you also reduce the risk of losing money on the order should the customer cancel after work has started or otherwise renege on payment.
2. Take Advantage of Interest-Bearing Checking Accounts
These kinds of accounts generally require a minimum balance, so be sure to keep enough funds in them to cover upcoming payments as well as meet that minimum. The interest rate on these checking accounts is lower than that of a savings account, so you’ll still want to keep the bulk of your funds in an account with a higher rate of interest.
3. Sell Equipment and Inventory You Are No Longer Using
As businesses grow, they tend to change the methods in which they conduct business and tweak their product lines. As such, you will inevitably build a collection of unused equipment and inventory. Rather than let it gather dust, sell it off, even if it’s for less than the value of it. An increased cash flow is better than a pile of unused items.
4. Use a Bi-monthly Pay Period
A semi-monthly pay period will end the year with 24 payments, whereas a bi-weekly pay schedule will result in 26 total payments. Considering the amount of time it takes payroll personnel to collect time information and compute payment, eliminating two paydays will ave your company some cash.
5. Purchase Used Equipment
When possible, look for used and refurbished equipment rather than buying new products. Refurbished equipment often carries a warranty in addition to having a cost lower than that of the same product in new condition. When buying used equipment, look for foreclosure sales for the chance to purchase it at a steep discount.
By following these practices, it is possible to increase your business’s cash flow, as well as slow down the expenditures that your business incurs.