If you’re a small business owner, it may seem like every day brings new challenges. One of the biggest is managing cash flow and loans. If your business is new in the market, you may not realize how important this is until you start growing and expanding.
For example, let’s say that your business is investing in real estate. You sell a home, and now are wondering how to avoid taxes when you sell a rental. What are the legal, ethical avenues that you can use to manage your cash flow?
Here are six strategies for managing cash flow and debt:
#1. Track Your Receivables
Track your receivables.
It’s essential to track how much money you owe and when you’ll be able to pay it back. If a customer owes you money, ensure they receive a bill for their purchase or service as soon as possible after completing the transaction. If clients do not pay on time, contact them with reminders about their payment obligations until they are satisfied that payment has been received in full and on time (or at least within 30 days).
If an invoice is paid late or not, notify the client immediately, so they know what happened and why there was a payment issue; otherwise, they might think something else happened like fraud or theft, which would cause them more stress than necessary!
#2. Send Invoices Immediately
Sending invoices promptly is a great way to manage cash flow and debt. It can also help you do more with less, which is vital when managing receivables or expenses. It helps create anticipation among clients who may not know how long it will take until they receive their final invoice due date.
If possible, send out invoices within 24 hours after receiving payment. For larger projects where payments aren’t received until weeks later, then consider using factoring services like Invoice Factoring Companies.
#3. Utilize Invoice Factoring
Invoice factoring is a financial tool that allows you to sell your invoices at a discount. It can be a short-term solution to cash flow problems and a great way to get cash quickly. Invoice Factoring only works for businesses that invoice their clients, so if you don’t already do this, make sure your business is ready before applying for an invoice factoring company.
Comparing the different companies before choosing one is essential because some companies offer better rates than others. The best way to find out which company offers what rate is by looking through their website or calling them up and asking about what they offer in terms of interest rates and payment terms (the longer it takes).
#4. Keep an Eye On Your Expenses and Do More with Less
You can use a budget to move from “doing more with less” to “doing precisely what you need to do.”
- Track your expenses. If you’re not tracking your spending and savings, that’s a huge problem — and one of the easiest ways to get into debt! Start by writing down all of your monthly bills (payroll, rent/loan payment) in one place so that they aren’t floating around in your mind or otherwise forgotten about when it comes time to pay them. Then create a spreadsheet that shows what each category is going toward (e.g., groceries vs. entertainment vs. transportation vs. other). This way, there won’t be any surprises when it comes time to pay those bills.
- Save money by cutting costs wherever possible. Eat out less often; use public transportation instead of driving; shop online rather than at stores; pick up dry cleaning arrangements instead of having someone else do it… the list goes on! And don’t forget that reducing your loan balance may seem easier said than done. Still, there are things like putting off making big purchases until after payday, which will help reduce interest rates over time.
#5. Consider Short-Term Financing
You can also consider short-term financing. A short-term loan is a type of credit line that lasts for a set period, usually three to five years. Unlike an installment loan, you don’t have to make payments on it until after the loan has expired. If you need more money than what’s available on your current statement, this might be one way to get it without having to pay significant upfront costs or finance charges associated with other types of loans.
To find out if this is right for you and your business plan, ask why we need additional funds? How much do we need? What will happen when we don’t repay the balance within our repayment terms (and how long should those terms last)? Are there other ways in which we could satisfy our needs without incurring additional loan obligations? Will repaying these debts affect our ability to manage cash flow over time by causing delays in paying bills or incurring late fees from creditors like banks/credit unions?
Key Takeaway
In conclusion, managing cash flow is not an easy task. It takes time and effort to learn how to do it effectively. It also requires good background knowledge of your business, its needs, and the market conditions to make the best business decisions for success.
For more resources on managing the cash flow of your business, check out our blog for more insightful articles.