Five Cash Flow Essentials for 2023
Surveys have found that many small business owners are worried that their business will not survive beyond this year, with cash flow cited as one of the top concerns, due to rising costs and uneven revenues. As 2023 rolls on, cash flow should be top of mind for small businesses everywhere. Following are five essentials to keep in mind in order to optimally manage it.
1. Know the Challenges
There are plenty of challenges that can impact cash flow in addition to rising costs. These include slow business periods, unexpected expenses, late payments from your customers, and even fraud in some cases. Understand the challenges you face and take the right measures to prepare for them. Project and forecast your expenses and cash flow. Regularly monitor and make adjustments as needed. Have a system in place for following up and collecting late payments. Protect your business from fraud by checking IDs when customers use credit cards, using tokenization for ecommerce transactions, and prioritizing network security.
2. Utilize Technology
There are numerous tools available that can provide real-time cash flow analysis, so if you’re not using at least one of them, it’s time to explore your options. With the rise of artificial intelligence we’re currently seeing, these tools are bound to only get better in the near future.
Inc.com suggests using “powerful-but-affordable technologies” like accounting software, financial institution apps, mobile deposits, online payment platforms, inventory tracking software, and scheduling apps to better anticipate receivables and cash flow, while better timing payments.
3. Encourage Customers to Pay Digitally
Asking customers to pay digitally rather than by mailed payment can help speed up the process of getting paid.
As Michael Rangel at Fast Company says, “Consider expanding the methods you use to accept payments, and encourage your customer to use a digital means of payment such as direct deposit or online payment processing platforms. Waiting for a physical check to be cut, mailed, and deposited into your bank can take days to weeks. Even if some of the digital methods come with small processing fees, the benefit of receiving payments faster could outweigh the roughly 2%-3% you might have to pay for processing.”
On your end, do what you can to accept as many forms of payment as possible to make the process as frictionless as possible for the customer.
4. Automate Late Payment Follow-Ups
Use one of the aforementioned technologies to help you automate follow-up on late payments from customers. There are software programs, such as Quickbooks and others, that will do this for you. You might be surprised by how big a difference follow-ups can make, and they might be the difference that makes your company cash flow positive when it comes time to pay the bills. Automate the process to save yourself (or your employees) a great deal of time.
5. Charge Late Fees
Utilize late fees, and make sure customers are aware of them when they are initially invoiced. This can help with cash flow in a couple of ways. For one, the extra money that comes with a late payment increases the amount of money you’re actually receiving. Secondly, knowing there will be a charge for late payment can encourage customers to pay promptly and on time, which is the real goal.
Cash flow is a chief concern for businesses at any time, but with the current state of the economy and the continued issues of the post-COVID era, optimizing your cash flow management habits has never been as essential.