When running a business, profit and cashflow are two important factors. While you can’t take full control, you can have some influence over them. Here are five ideas to take more control over your business finances and improve your cashflow and profit each year.
Reduce Your Outgoings
It may sound obvious that to increase your profit you need to reduce your outgoings, but how do you do that without sacrificing quality? Contact your current suppliers and negotiate a better rate. If you agree to a long term business deal, many will be willing to offer a lower rate. It is also worth looking into each of the outgoings and determining whether you really need them. Just cutting £10 per week will save you £520 per year.
Offer Payments by Credit Card
Accepting credit card payments will encourage your customers or clients to pay you straight away, instead of waiting until the last day of the invoice. While you will have to pay a small fee to the credit card companies, this may be worth it for the upfront payments and not having to worry about cash flow.
Offer Discounts for Prompt Payments
Show customers that you appreciate their custom by offering a discount for a prompt payment. This could be a percentage off the total bill or a set amount. This helps to take more control over your cashflow as more customers or clients pay their bill within that time to gain the discount so you can use the money towards your own outgoings when you need it.
Look Into Invoice Factoring
Have you considered factoring your invoices? This will help to improve cashflow and is similar to taking a credit line. A factoring company will offer you the amount that is due from the invoices and then you pay that money back, with interest, as the invoices become due.
Some of these companies will also be able to chase the bad debts for you, so you do not need to worry about if clients or customers fail to pay. This is usually for a larger fee as they take on the risk of the bad debt and losing out on the money.
Opt for Asset Financing
Asset financing involves using one or more assets from your company as security against a loan. If you fail to pay the loan, you will lose your assets as payment towards the amount. Any type of asset can be used for this but it must be free of debt and you cannot sell the item on while it is being used against your finance. This will increase your cashflow and the interest on the loan may be tax deductible.
Taking more control over your finances is essential when running a business. Following the above five tips will help to improve your business cashflow and encourage clients or customers to pay quickly, which will help to increase your profits. When looking into loans, be wary of the terms and interest rates to make sure they remain beneficial for the company.