Tips on generating healthy cash flow

Generating business and driving business growth can be an exciting time moving forward, but drawing customers to your product doesn't necessarily translate into healthy cash flow.

Cash flow problems are cited as one of the key reasons small businesses fail so in order to maintain growth it's vital that you concentrate on receiving prompt payments so you can reinvest the cash you generate.

There are many ways to help promote healthy cash flow, but we've sourced four easy to follow tips that can keep the cash pumping and confirm the growth of your business, regardless of the industry it operates in.

Identify your expenses

Review your budget and identify any areas that aren't exactly necessary. Small businesses rarely have the luxury of spending money on things they don't need, especially when they are only just starting up. Sometimes the best way to guarantee healthy cash flow is by limiting the outflowing cash.

Ask for upfront payments

A good way of stopping bad debt in its tracks is by requesting all or a portion of the payment you are owed upfront. Although credit customers can help drive sales and business growth, they aren't always guaranteed to pay and can be a huge risk. By requesting a portion of payment upfront you limit the damage of any potential bad debts.

Follow up overdue payments

There's no real value in making a sale if you are forever waiting for payments to be made. If you can't afford accounting software simply create an excel worksheet that highlights the dates payments were made and the days they are due.

Bad debts account for a large portion of cash flow woes so try to limit the damage where possible. In some cases it's better to outsource your debt collection in order to guarantee it gets paid. If you're looking for a debt collection option, Dun & Bradstreet can help.

Redesign your invoice

Messy, unclear invoices and outdated processing systems can help contribute to bad debts so it's a good idea to review your invoicing system and make adaptions if necessary.

Your invoices should be simple and easy to read, but should also identify all the key important information you want your customer to know, such as date of purchase, total amount owing, due date of payment and preferred payment methods.

Having trouble redesigning your invoice? Click here for some tips that can help.

Healthy cash flow is crucial to keeping your business afloat, but developing a system that works for your SME can be difficult. However, as long as you limit unnecessary expenses and promote healthy payment you will be capable of stopping bad debt in its tracks.

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