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Poor cash-flow management can lead to business failure. Here are four tips for improving it:
1. Create new types of cash revenue. Pre-sell your product or service at a discounted rate using a viral Internet deal site. Many businesses are generating cash by posting special promotional offers on these sites. Be cautious. These sites require steep discounts and take a percentage of the sale. First calculate whether you will make enough profit to make the deal worthwhile.
2. Improve your business’s overall collection rate. If your business sells services, review your business’s payment terms. Revise your payment policy to request up-front payment and be sure to explain the new terms when services are contracted to avoid disputes. With products, determine whether you can offer online payment options or accept credit-card payments on your mobile phone. The easier it is for clients to pay, the faster they will pay.
3. Decelerate your business’s outflow of cash. Your business’s goal should be to pay your accounts payable on the date they are due and not a single day prior. If your business does not already do so, use accounting software to keep track of when payments are due and monitor your cash-flow situation. Using an Automated Clearing House (ACH) debit system for your business’s payables is an effective tool for ensuring cash does not flow out of your business any earlier than necessary.
4. Eliminate unnecessary expenses. Using accounting software, you can pinpoint certain expenses that can be reduced or eliminated. For example, instead of spending money on paper, envelopes, ink cartridges, and postage, your business could create and send all invoices electronically.
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