At one point or another, almost every business runs short of cash. Whether due to normal fluctuations in demand or an unexpected decline in sales, cash shortfalls are bane of every company, and are responsible for sleepless nights for many business owners.
Yet, there are a number of simple ways that you can reduce your dependence on your company’s line of credit and increase cash that you need. Here are five no-cost methods to try:
Increase Receivables Collection Efforts: This is easiest and fastest way to generate cash but, surprisingly, most companies do a terrible job of it. Start by calling all customers whose invoices are between 25 and 30 days old to ensure that they have your bill and to find out when it is scheduled for payment. These are easiest collection calls to make and they often result in faster payment. And, it allows you to quickly rectify problems that may delay your check.
Get Payment In Advance: Another often overlooked technique is to simply ask customers for advance payment, or for a partial payment for goods and services. This approach is especially valid with large purchases, or on work where you’ll incur significant expenses before being able to deliver final product. Most customers will agree to such a request without asking any questions.
Invoice More Frequently: Many companies send out invoices once a month, typically at end of month. That gives buyers who purchased early in month up to 30 additional days to play with your money. The frequency with which you prepare bills will depend on your business, but most companies can justify preparing invoices at least weekly.