Usually, the progress of the small size business owners revolves around the payments from the customers. The cash flow is imperative for all kinds of business owners: small as well as full-fledged enterprise. If business owners do not have cash in their hands, they will not be able to purchase the raw material and make their payments to create the finished products. Due to insufficient availability of cash, the business owners will not be able to make payments to vendors. The best way to maintain the optimum cash flow in the business is by using accounts receivable software.
Here, in this article, we are going to discuss various tips and tricks to the cash flow:
1.Stop Making Payments At Once
The small business owners should manage the cash flow like an air traffic controller. It is impossible to land various planes simultaneously. All business owners expect that their customers will make payments before the deadline, and they will have enough cash flow at the end of the month. But, the reality is different! The business owners do not receive enough cash at the right time. Consequently, they will not be able to make payments at the right time. It will affect their relationship with their vendors. You should issue the payments to your vendors at a different time so that you have some money in your account for the worst-case scenario. The accounts payable software can help to make the right payments at the right time. You should divide the payments into different groups:
Tier 1: Top Priority Group
You should make a group of vendors that comes in the top priority list, and you should pay them as soon as possible. This group of vendors can hurt your business if they stop delivering their supplies. Also, you should consider various other top priority payments, such as payroll, rent, taxes, and utility bills.
Tier 2: Important to Pay Group
This is the next priority group, such as oil bills, utility bills, and various other insurance payments. You can hold on these kinds of bills for some time, but these kinds of bills are important. Thus, you cannot keep them on hold for long. For instance, if you fail to pay utility bills for long, then the electric supply at your office will be shut down. So, this group of payments is important as well.
Tier 3: Flexible Payment Group
The best source of flexible financing is vendors, suppliers, and wholesalers. Most business owners maintain good relationships with the suppliers, and they make their payments after some time. Thus, you can delay the payment of suppliers and vendors group. It will allow you to get some cash in your hands.
2.Pay After Getting Payments
It is recommended that you should make payments after receiving cash from the customers. You should not make payments before getting cash in your hands from your customers. If you make payments and the numbers of outstanding invoices are growing in number, then you may go bankrupt. The accounting software will guide you to make the right payments and prevent your business from going out of cash.
3.Never Use Sales Tax Money
The sales tax money will cost you very high in likely penalties. When it comes to sales tax money, then you should follow stringent rules and regulations. You should save the collected sales tax amount into a separate bank account. The tax liabilities start growing when the business owners utilize the sales tax money for maintaining liquidity in the business.
4.Invest In Accounting Software
It is imperative to keep an eye on the cash flow in your business. You should invest in the accounting software such as quickbooks account receivable to keep the precise record of the accounts payable and account receivables. The accounting software will automatically generate invoices and send them to the customers. When your clients or customers receive the invoice, then they will try to make payments as soon as possible. It will help to ensure the cash flow in the business.
5.Creative Payroll Schedule
All business owners follow different revenue strategies. Retailers and restaurant handlers collect revenue on a daily basis. On the other hand, wholesalers and health clubs collect the payments on a monthly basis. All business owners should build a creative payroll schedule. A good schedule will ensure a good amount of cash in your hands.
6.Charge Fees for Late Payments
You should encourage the customers to make their payments before the deadline. The account receivable solutions will keep the record of late payments and help you to find the customers who are defaulters. You should clearly mention in the invoice that you will charge for a delay in payments. Nobody will like to pay more! Therefore, this trick will help you to collect payments at the right time. In case they make late payments, then you can compensate for the losses with late payment fees.