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If you’re having trouble managing cash flow in your organization, know that you’re not alone. Cash flow issues are one of the most common reasons for businesses failing, and it was reported that 82% of businesses that fail do so because of poor cash flow management.
It doesn’t mean that cash flow issues are unavoidable, however. Many businesses manage cash flow just fine, and it’s usually because of a combination of using the proper solutions, reducing overall costs, and making the right decisions. Here are some of the ways that you can facilitate cash flow management in your organization.
Lease Instead of Buying to Facilitate Cash Flow Management
If you are split between buying equipment and leasing it, in most cases, it is recommended that you go with leasing. There are a few cases where it makes sense to buy, but if we’re talking about very expensive equipment, it’s almost always better to go for a lease and pay small payments per month. Not only will you have more room to breathe, but you never know how easy it will be to unload and replace that piece of equipment later.
Use Invoice Factoring
If you have lots of accounts receivables and are looking for a way to get money right now, then you could look at invoice factoring services. With invoice factoring, you can get money from a client’s invoice before its due date. Invoice factoring services will give you a loan corresponding to a portion that invoice and collect the debt themselves.
The good part about these services is that your business’s credit will be largely irrelevant. It’s your client’s credit that matters the most, so if it’s well established and in good health, you should qualify.
Switch to ACH Payments
If you’re a service that asks for recurring payments and you’re currently taking checks, you need to consider making the switch to ACH payments instead. ACH payments are much faster, guaranteed, and have lower fees as well. Payments also don’t have to go through the lengthy and sometimes unpredictable account verification process.
You could use an ACH payment process like Yodlee instead and get your funds on the same day or the next. They perform bank verification on the spot using the client’s information. The client only has to give their information once for bank verification, and you’ll not only be sure that the money is in their account before the payment is cleared but you’ll also know exactly who you’re dealing with.
Cut Your Overheads
Even the most efficiently run businesses can find ways to reduce their overhead costs. If you’re hiring most of your people in-house, then you could see where you could outsource. If you’ve been with the same utility provider for the whole time you’ve been in business, see if you could negotiate a better deal or switch. Go lean and eliminate unnecessary steps in your processes. And use smart technology coupled with energy-efficient solutions to keep your energy costs to a minimum.
Improving cash flow management is all about being mindful of your expenses, using the right tools and options, and being as cost-efficient as possible. So, look at what you could do better in your organization right now and make swift calculated changes.