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What Can I Do to Get Paid Faster And Improve Cash Flow?

by Emily Moody

Improving cash flow can be a challenge for small businesses, but there are some common areas of focus that can help alleviate some of the stress. Without always having cash on hand or access to cash, it can be challenging to make payroll, cover bills or pay tax obligations.
Managing cash flow is key to building long-term financial stability for any company. Some of the tools that businesses could employ include:
1. Provide customers with incentives to pay early and impose penalties for late payments. Offering a discount for paying early creates a win/win situation. Conversely, penalties for late payments can serve as a deterrent.
2. Send invoices out immediately.
Immediate billing starts the payment clock right away, shortening the time that payments can be anticipated.
3. Use electronic payments or business credit cards.
Electronic payments deduct from your accounts the same day versus accounting for lead time stemming from sending checks through the mail. Some business credit cards offer grace periods for as long as 21 days, which also can help.
4. Review accounts payable terms.
Negotiate discounts for early payments and pay close to due dates on other bills rather than initiating payment immediately.
5. Reduce spending and closely monitor expense trends.
Diligent attention to your income statement on an ongoing basis will help you identify positive and negative trends in business expenses and allow for quick action to remediate where necessary.
6. Closely monitor inventory balances.
Pay close attention to items that are moving at a slower pace, as they are tying up cash that can be used to create profit elsewhere.
7. Consider leasing versus buying.
Leasing often requires less money up front and can come with servicing plans for equipment. Additionally, lease payments are a business expense which reduces tax liability.
Answers provided by Emily Moody, Commercial Banker at Simmons Bank. She can be reached at 314-569-7201 or emilie.moody@simmonsbank.com. The views and opinions expressed in this article are those of Emilie Moody and are not endorsed by, and do not necessarily reflect the views of, Simmons Bank. Simmons Bank does not provide tax, accounting, or legal advice.

Submitted 158 days ago
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