Is money flowing out of your business, faster than it’s coming in? Turns out, you’re not alone.

According to the National Federation of Independent Business research, half of small businesses don’t hold enough cash for one month, while 25 percent of small businesses can’t even make it two weeks.

While challenges vary from industry to industry, one problem is universal: no business can operate with an empty bank account.

In fact, it’s likely your business already has or will struggle to have enough cash on hand to make payments needed to stay afloat. About 40 percent of small businesses report cash flow challenges. So here’s what you can do now to ensure your business doesn’t languish later:  

Forecast ebbs and flows

Did you know 29 percent of failed startups attribute their downfall to an absence of cash? Sadly, this can be avoided by figuring out how your income and expenses will rise and fall throughout the year.

One way to do this is to create a monthly cash flow report, where you compile previous years’ income and expense figures month-over-month. These findings can help forecast swings in cash balances to determine when to invest and when to save.

If your business is new, you can still build out projections by using industry data. For example, if similar businesses in your industry experience slowing in the summer and increased sales during the winter, it’s likely your company will follow a similar pattern.

Be a savvy biller

A business’ success relies on being paid for its goods and services. But poor invoicing and accounting practices can hinder your company’s financial health.

So how can you fix this?

  • For one thing, invoice clients in a timely manner and send balance-due reminders on past-due accounts.
  • Ensure the invoice’s terms are crystal clear, leaving no room for confusion.
  • Ask for upfront deposits for large contracts, and consider splitting their invoicing across a series of bills to help maintain a steady revenue.
  • Entice customers to pay early and often by offering discounts. It’s a common practice for many vendors to offer a 2 percent discount for payments made within 10 days of invoicing.
  • Emphasize the importance of on-time payments by imposing interest penalties on past due invoices.

Follow the Golden Rule

Just like you, other companies and individuals want to be paid promptly. What’s more, paying invoices on time goes a long way in building goodwill and creating healthy relationships with vendors, suppliers and employees.

If paying bills within the standard 30 day timeframe isn’t always feasible, ask your vendor about extending invoice terms. If a supplier is willing to push your due date out, that’s time your cash is working for you, not them.

Also, keep in mind that early payment discounts likely exist with other vendors, so ask them. It may seem small, but those discounts can add up to be a sizable savings come year-end.

Create a steady sales pipeline

Sales probably account for a majority of your company’s income. Yet, no two sales are alike. While one large customer always pays in full and on time, a wholesaler can take months to settle its accounts.

The point is, a sale is a sale, and it will always be important to the sustainability of your business, despite inconsistent payment methods. So focus your marketing efforts with that in mind. A marketing sales funnel can provide the framework needed to help maintain a consistent sales pipeline and steady stream of income, regardless of payment variations.

Leverage your bank or credit union

Here’s the thing: even the best strategies can change as marketplace realities play out, and that’s especially true with your company’s cash flow plans.

It never hurts to speak with your bank or credit union early on to see what cash management solutions and preventive measures could be put into practice now to help safeguard your company later. Doing things like setting up a line of credit (in case of emergencies) or depositing funds into a high interest account can make a difference.

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