Attention: You are now leaving the Wintrust website.
by Barry Bridges
June 28, 2017
by Barry Bridges
June 28, 2017
You could face any number of challenges as you nurture your small business, and struggling to come up with the perfectly punny name doesn't even make the top 10. One of the most notorious problems for small businesses involves something far more serious — failure to manage cash flow.
Smaller businesses, especially young businesses that haven't had time to build cash reserves, can be particularly vulnerable. Luckily, you have several tools and strategies at your disposal to help your small business navigate these choppy waters.
Consider the following advice for improving your cash flow and keeping the momentum going — then you can focus on finding a punny name.
Provide structure for your clients (and you)
There's nothing wrong with treating your small business as a labor of love. Just remember that love sometimes needs a little structure.
Consider setting up a few simple policies and procedures. Some will have an external focus (getting customers to pay on time) while others will be internal (keeping track of your incoming and outgoing capital). In the end, they all share the same goal: improving cash flow.
Create a payment structure
Taking a passive approach to billing can leave a small business in dire straits when clients are habitually late with payments. To help address or even prevent these problems, consider making a few additions to your standard contract language, such as:
If a client pushes back on the requirements, present them as incentives for paying on time as opposed to disincentives for paying late. Clearly communicating expectations beforehand, and remaining respectful if conflict arises, can help you maintain those all-important professional relationships.
Create a cash flow infrastructure
Don't assume that delinquent payments from clients are the sole cause of cash flow problems. You can take steps within your own organization, including:
Sometimes a cash flow issue may be arising from within, not without. By creating and maintaining a solid business infrastructure, you can identify internal problems and streamline the system.
Take charge of cash flow problems with a credit card
Making strategic use of a business credit card can help you manage periods of slow cash flow. Business credit cards offer a way to pay expenses that alleviates financial pressure, and they can also provide extra capital through lucrative rewards programs.
Find out how easy solutions to your cash flow problems might be in the cards.
Business expense? Put it on the card…
When clients take their time paying for services rendered, it can be frustrating. When you have bills of your own coming due, delays can also be debilitating. The good news is, a small business credit card could provide an opportunity to make time an ally instead of an enemy.
Rather than writing checks from your commercial account to pay for everyday office expenses when you're short of capital, consider putting them on your business card. It can take as little as two days for a check to clear, but the monthly billing cycle for credit cards works to your advantage here. In fact, some credit card issuers have business-friendly policies that allow deferred payments.
… but be careful when you charge now and pay later
Making credit card purchases during periods of slow cash flow can provide you with some financial breathing room. At the same time, it's important to use this strategy sensibly.
Make it a point to use your rewards
Rewards points aren't just for family vacations. Many business credit cards have specialized rewards programs that, if used correctly, can help you improve your cash flow.
Like personal credit cards, business credit cards use a points-for-purchases system. Typically, you'll earn 1 point for every dollar spent on general purchases, plus bonus points for select business-related purchases. Popular bonus categories include:
Different uses for different rewards
Some cards focus on cash back or travel rewards, while others offer a combination of the two. Here are some tips on how to use them.
With cash back rewards, you can redeem points for a quick infusion of capital by:
Redeeming points for travel rewards can deliver discounts for purchases like airfare, hotels and ground transportation — and with enough points, maybe even free flights or hotel stays. Some cards may also let you transfer points to airline or hotel loyalty programs. Whichever way you decide to use your travel rewards, the important thing is that money saved on travel expenses means less money coming out of your operating budget.
Pro tip: some issuers let you transfer points from a personal card to a business card. These transfers can help you earn points and rewards even more quickly.
Business or personal card?
You could use your personal credit card for your small business, but a dedicated business card has some distinct advantages. Besides the potential to help your cash flow, the reasons to choose a business credit card include:
Facing the challenge of slow cash flow
Almost any business has to deal with uncertain times when the money coming in doesn't keep pace with the money going out. The effects of ebb and flow can be magnified for owners of small businesses, but don't be discouraged. You were resourceful enough to start a small business in the first place, so look at the problem of slow cash flow as another challenge to overcome.
The post How to Keep Your Small Business Afloat When Cash Runs Low appeared first on The Simple Dollar.
The views expressed in content distributed by Newstex and its re-distributors (collectively, "Newstex Authoritative Content") are solely those of the respective author(s) and not necessarily the views of Newstex et al. It is provided as general information only on an "AS IS" basis, without warranties and conferring no rights, which should not be relied upon as professional advice. Newstex et al. make no claims, promises or guarantees regarding its accuracy or completeness, nor as to the quality of the opinions and commentary contained therein.
This article was written by Barry Bridges from The Simple Dollar and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to firstname.lastname@example.org.