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3 Simple Ways to Improve Your Business’s Cash Flow

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Cash Flow is Vital 

Good, healthy cash flow is crucial for your business. You need to get paid, and you need to get paid in a timely manner. If your clients are taking too much time to pay their accounts, there’s a bevy of problems your business can run into. 

You may not be able to pay your employees, your fixed costs, or make necessary investments in your business. Simply put, good cash flow will allow you to run your business smoothly. 

Utilize High-Interest Savings Accounts 

How you store funds for your business can make a tremendous difference in terms of both liquidity and cash flow. A good high-interest account will allow your business to generate profit when funds aren’t needed, and keep your assets secure. It can also increase the efficiency at which you can run your business’s finances. 

Benefits of Business Banking

-Increase financial security

-Improve financial flexibility

-Improve cash flow

-Accrue interest

Many players operate in the business banking industry. Some are better equipped to work with large corporations, while others are small businesses. Some are better suited to work with companies operating in a particular sector. It’s crucial to understand the business banking industry to find the best fit for your company. 

Invoice Factoring 

If your business relies on getting paid through invoices, invoice factoring is a great option to consider to make your business run more smoothly and improve your cash flow. 

What is Invoice Factoring 

Invoice factoring is the practice of selling your invoices to a third party, who will immediately give you a portion of the invoice, normally the vast majority of the invoice, and then collect the payment of the invoice from your client. When they collect, they will then pay you the remainder of the invoice balance, and subtract a small fee. 

Invoicing companies exist to give you access to the funds you invoice for immediately. Having the lump sum from the invoice immediately can allow your company to pay its needed expenses and operate with greater flexibility. Some of the industry leaders will be able to give you the funds immediately, 24/7, whenever you send an invoice. 

The Best Invoice Factoring Companies 

Deciding what invoicing company to work with is an important decision. The companies vary in the percentage of the invoice they provide up front and what fee they take, as well as when they can deliver payment. Here’s a comprehensive overview of the industry.

Different invoice factoring companies specialize in different sectors. Some companies offer their services across industries. Certain companies even offer specialized industry-specific benefits, such as fuel rewards programs for trucking companies. If you work in an industry like trucking, it’s worthwhile to think about which companies work specifically with your industry

Difference Between Recourse and Non-Recourse Funding 

One of the most important things to think about when deciding which factoring company to work with is determining if they offer resource or non-recourse factoring. What’s the difference? 

Suppose the situation where you give an invoice of yours to your factoring company, collect the lump sum payment, and go about running your business. Later, the company you invoiced goes out of business. They cannot pay the invoice. What happens next? Who is responsible for that debt?

If your factoring company is non-recourse, then you will not be responsible. You will get to keep the lump sum, and the rest of the invoice will be paid to you whenever the factoring company is able to track down the debt. However, if your factoring company is a recourse invoice factoring company, you will be responsible for the debt. Before working with any factoring company, it’s critical that you carefully read their agreement. To learn more about the finer details and advantages of recourse and non-recourse plans, click here.

Offer Incentives for Up Front Payment 

If you can offer discounts or some other incentive for upfront payment, think about it. It could be incredibly beneficial to your business. Increasing the amount of payment upfront is a worthwhile solution to cashflow problems, and can make sense in a lot of industries. 

If there is an exciting nonfinancial incentive you can offer, such as some sort of perk, which is easy for your business to deliver, consider implementing it. If this is commonplace in your industry, or you think would be reasonable with your customer base, consider implementing it. Upfront payment is the best cash flow issue mitigator, and anything to increase it is worth thinking about. 

About the Author 

Blake Bobit has been an entrepreneur and business owner for over 25 years. He is the CEO and founder of Solution Scout, which he made to provide the most helpful answers to questions about business solutions. Blake provides strategic advisory services to businesses in many industries nationwide and is passionate about helping others reach new levels of success.

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