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10 Tips for Boosting Your Company’s Cash Flow

Without cash flow, it won’t be long before a company goes out of business. Get 10 tips to boost cash flow and ensure the long-term health of your business.

“Cash is king!” the business axiom goes. And it’s true: Without cash flow, it won’t be long before a company goes out of business. This is true even for profitable companies, because “profit” only exists on paper until cash is collected and deposited into the bank.

 

Following are 10 tips that can help you boost your company’s cash flow:

 

1. Forecast cash flow

This is an easy one to overlook — so long as cash is coming in and the books balance every month, why forecast cash flow? Yet an accurate picture of income and expenditures makes it easier to identify when an invoice hasn't been paid, a bill is outstanding or overall business volume is decreasing.

In addition, cash forecasting helps mitigate the impact of unexpected downtimes or disasters, since owners know how much cash they can expect next month and how much to budget for necessary expenditures, such as repairs.

 

2. Optimize tax returns

Few business owners like doing taxes, especially if they result in a balance owing. But it's a good idea to do two things with returns:

 

  • Have them evaluated by a professional accountant for accuracy
  • Look for tax savings at both the federal and state levels; in states like Texas, certain commodities are exempt from taxable status

 

3. Look for state incentives

While it’s possible to reduce cash outflow through federal tax incentives, it's also worth looking for state-specific options. For example, Texas offers a variety of energy incentive programs, including one which lets business owners deduct the cost of a solar energy system from their company's taxable capital, or alternatively deduct 10 percent of their total income. For a list of energy incentive programs in your state, visit Energy.gov.

 

4. Trim capital expenses

Capital expenditures such as vehicles, office space or network infrastructure may not be optional, especially if a company is experiencing rapid growth. Effective cash management, however, depends on investing wisely in capital purchases when they are necessary and cutting back where possible.

This means an extra 2,000 square feet of office space might make sense over the long term, yet spending an extra $10,000 on marketing may not. Return on investment (ROI) should always outpace expense over time. It's also possible to defray capital expenses by repairing current equipment or buying used items.

 

5. Find faster payment options

Offer discounts or incentives to encourage customers and vendors to pay on time or before their invoice is due. In today’s mobile-first environment, it’s vital that you offer mobile payment options. Enable your customers and vendors to pay by credit card via their mobile device and receive an email receipt.

 

6. Review your payment structure

Still paying employees by a physical paper check? Consider switching to direct deposit or the Cadence PayCard, a reloadable card that’s a cost-effective alternative to old-school paper paychecks. Doing so streamlines operations and reduces costs on your end, freeing up cash.

 

7. Have backup

Establish an ongoing relationship with your bank, starting with using bank services for payroll and then extending to include your business savings and/or investment accounts. These relationships create a framework of trust which can be helpful in securing a loan or credit line approval.

To learn more about how your banker can serve as one of your trusted strategic advisers, read this Cadence Bank article.

 

8. Don't leave cash lying around

Invest! Savings accounts, certificates of deposit and money market accounts typically pay better interest than standard business checking accounts. If possible, invest the bulk of company assets in higher-yield funds and keep only what's necessary in easily accessible accounts.

 

9. Streamline supplier payments

Suppliers want to be paid, but paying everyone as early as possible can make long-term cash management confusing. Instead, set up a regular schedule for each payment that satisfies supplier needs while still regulating cash outflows.

 

10. Send payment reminders to customers

Invest in a system that automatically generates and sends out past-due notices for customers, and don't be hesitant to use collection services when warranted. Another idea is to take deposits on large or unusual orders so that if the order is canceled or never picked up, at least some of the cost can be recouped.

 

Cash management is the key to the long-term health of any small business. Strive to minimize outflows, streamline inflows and know exactly where every dollar is going.

 

Read this Fresh Insights article to learn more about cash flow management and profitability. 


Cadence Bank offers a wide range of treasury management products and services that can help you improve your business’s cash flow, including receivables lockbox, invoice-to-pay, electronic payments via ACH and EFT, and zero balance and cash concentration accounts. Contact a Cadence Bank representative to learn more.

 

This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.



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