A cash flow loan is a small business loan that is based on your company’s cash flow. Unlike traditional asset-based business loans, a cash flow loan doesn’t require any business assets for collateral. Cash flow implies the company’s ability to create value and generate profits. In this blog, we shall discuss cash flow in depth and how a small business can improve it.
Ways to Improve Cash Flow
1. Improve your Accounts Receivable
By actively managing your accounts receivable, you can stay on top of outstanding invoices and decrease the time it takes to get paid. One way you can do this is by encouraging customers to pay early. Offering a variety of payment options will make it as easy as possible for a customer to pay you, such as ACH or credit card payments. While these options may come with processing fees, getting money faster is better for your business if cash flow is tight and eliminates time & labor spent on collection. These options can help prevent you from stacking up credit card debt to cover expenses.
2. Incorporate Automation in Your Invoicing
Incorporation of technology not only improves the efficiency in your business operations but also eliminates the need for any human workforce to manually perform the task. This, in turn, helps save on worker wages, subsequently leading to increased profits. One of the biggest use of technology that you can incorporate in your operations is automating your invoicing. Automation in invoicing helps in raising timely invoices to your clients. It also ensures that you receive your monthly payments on time, ensuring better mitigation of your internal organizational finance for different business purpose such as paying salaries, buying raw materials or advertising their product. This automation also helps forecast your estimated accounts receivable for the financial year and better strategizing your next business move.
3. KYC – Know Your Customer
Know Your Customer – these three words would definitely help in maintaining a positive cash flow. In other words, it is important for you as a businessman to do a check on the people before getting into business with them. You can keep a check on their credit and payment practices. In case your customers are good buyers but bad payers, it is time for you to think about whether to continue business with them or not.
4. Maintain Goodwill within the Industry
Maintaining goodwill and cordial relation with your customers, retailers, or even competitors could prove extremely profitable in the long run. It is extremely important to start networking and building a relationship right from the start of your business venture. Being cordial with your business loan provider from the start can help you get heftier SME business loans in the future. Moreover, offering exciting deals and discounts to your customers on repeated purchase can ensure a loyal customer base for your business. Cordial relationship with your competitors might even turn into partnerships and collaborations later, which could significantly boost the cash flow in your business.
5. Liquidate Old Inventory
While managing your business inventory you need to make sure that the inventory you’re buying is actually selling. Also, you need to carefully consider which products are selling well and which of them are having a hard time turning over. If you have any old inventory that you’re having a hard time getting rid of, consider liquidating those items as soon as possible.
6. Dealer-Supplier Relationship
A good and healthy relationship with suppliers helps in maintaining positive cash flow. Building a good relationship with a supplier might take some time.
But it will definitely be very helpful when you will require inventory in advance. In addition, a good relationship will also help you buy goods and inventory on good rates and get the option of making payments later in the future.
7. Control Access to Bank Accounts
To maintain positive cash flow, it is crucial to protect your assets. The best way to eliminate fraud and unauthorized use of your company bank accounts is to make sure the proper safeguards are in place. Common safeguards include keeping the number of people who can access these accounts to a minimum, securing your IT infrastructure, frequently updating passwords, protecting your credit and debit card information and bank accounts, and using a dedicated computer for banking.
Top 3 Cash Flow finance
Invoice Discounting
Invoice discounting also called Bill Discounting is a way in which a company can borrow short term funds from banks or financial institutions based on their outstanding invoices. Invoice Discounting is a manner in which businesses can raise short-term funds to meet short-term liquidity needs. Invoice Discounting is an alternative to a business loan or an overdraft facility. Under Invoice Discounting, the company provides the unpaid bills to the banks or financial institutions and in return, receives funds up to 90% of the outstanding bill value. It helps keep cash inflow from customers constant and they can pay within their normal credit period.
Invoice discounting platforms work like matchmaking services for Businesses with Invoices and Investors seeking alternative financing solutions with high returns. Such platforms host a range of Investors from Individual Investors to Banks and NBFCs. Discounting platforms serve this purpose as the tenor for this facility generally range from 30–90 days.
Omozing
Omozing helps make Smart Money Moves for a Lifetime. They strive to get lowest interest rates and best terms for your Online Applications at www.Omozing.com . We’ve made business lending smarter, faster and easier by transforming the approval process from stumbling blocks to stepping-stones. This enables borrowers to not just get access to capital, but also understand what areas they need to work on in order to enhance their credit profile. Omozing ensures that Borrowers get a secure, safe and reliable application process that be tracked online.
Merchant Cash Advances
If your business makes a lot of sales using credit cards as a payment method, a merchant cash advance (MCA) may be a perfect fit.
With an MCA, a set amount of money is advanced upfront to a business by the merchant cash advance company. In return, the company repays the total advance, plus interest, with a percentage of their daily debit and credit card sales.