For any business to be successful, it will eventually need to earn a passive income and have strong cash flow. As an owner of a business, there are many tasks that you can follow to try to improve profitability and better manage your cash flow. There are five things in particular that you should consider incorporating into your business that would help you to better manage and improve your cash flow.

Focus on Collections

When it comes to cash flow, many people end up focusing on improving their profitability. While improving profitability is a good first step, it is only part of the equation. Beyond that, you also need to focus on your ability to collect this revenue. When you have a good revenue collection process in place, you will not only improve the amount of money that you earn each year through reduced bad debt, but you will also be able to improve the speed in which you collect money. This can help to reduce your borrowing costs and give you more money to put into your business.

Manage Employee Time

The biggest expense that most organizations have today is their payroll cost. While you need to have good employees working for you that are properly compensated, you also need to make sure that you are not paying too much. One great way that you can better manage your payroll costs is by investing in a time tracking software program. This will help you to get more accurate time card records while also managing overtime and other related expenses. Also, if you are dealing with labor unions, this software will give you proof and evidence that you are in compliance with the best labor practices.

Get Better Terms From Vendors

When you are trying to improve your business cash flow, another important thing that you could do would be to get better terms from your vendors. Almost all businesses today will have some vendors that they need to purchase products and services from. While you will want to make sure that you get your vendors paid on time, you can improve the cash flow position simply by getting extended terms. Depending on your business, industry, and the vendor, you should be able to get vendor repayment terms that are 30 days or more. However, you need to make sure that you fully understand the terms, which will help you to avoid getting charged with late fees.

Get Financing From a Bank

While staying out of debt is a goal that all businesses and people should have, there are situations in which it will be unavoidable. In these situations, getting a loan can be a great option. Ideally, you should get a loan from a bank, which can be secured by your inventory or A/R. If this is not available to you, another option would be to open up a business credit card. In either situation, this will help to manage your cash flow in the interim.

Know Your Costs

Ultimately, when you are looking for ways to improve business cash flow, you will need to know the true costs of your products and services. Many businesses do not fully understand what their costs of doing business are. If you do not know what your true costs are, after factoring in all variable and fixed costs, it will be impossible for you to know what you need to price the product for in order to earn a profit. Doing a full cost analysis will help you to avoid this risk.

When you are looking to improve cash flow for your business you need to always keep the customer in mind. While you can improve cash flow in the interim, long-term success will be based on your ability to provide good and recurring service to your clients. If you are able to do this, they are bound to return for future business.


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Finn Pierson
Finn Pierson is a freelance writer and entrepreneur who specializes in business technology. He is drawn to the technological world because of its quickly paced and constantly changing environment. He believes embracing technology is essential to capturing success in any business and strives to inspire and encourage top technological practices in business leaders across the globe. He's a fan of podcasts, bokeh and smooth jazz. His time is mostly spent learning the piano and watching his Golden Retriever Julian chase a stick.