Starting a small business is difficult enough, but providing it with positive cash flow is even more scrutinizing. When small businesses find themselves experiencing difficulties in this area it can eventually lead to failure. In order to help you get over the hump we have 10 powerful and effective tips that will produce continuous positive cash flow.

Great Customer Relations

Perhaps the most important thing you can do to keep cash flow positive is to develop good customer relations. When customers think of you as both a business partner and a friend, they are more likely to be prompt in paying their bills. They don’t want to sour the relationship any more than you do, so they will give priority to your invoice.

Suggest Flexibility

If by chance they run into a cash flow issue and you have built a trusted relationship; cut them some slack. Just by extended their payment deadline can help them get back on track and even provide you with more referrals. In the end this will help you grow your business as long as they don’t take advantage of your generosity.

Ensure There Is Invoicing

Invoicing provides a way for business owners to keep their customers in check. It also creates a sense of urgency for them to pay on time. Even when it comes to vendors who don’t keep their own bookkeeping and invoicing paperwork well, your proper invoicing will virtually make them want to pay you. Without a good invoicing system you will surely fail.

Proactive Sales Ledger Management

It’s very helpful to cash flow to be proactive in terms of debt collection. If a customer does not pay his bill on time, a simple phone call the following day as a gentle reminder of the balance due is often enough to correct things without damage to the relationship. When past-due balances are left to linger, resentment builds up on your end while fear takes over on the other end; both of which are a recipe for disaster.

Purchase Ledger Management

It’s not uncommon for vendors and customers to also play opposite roles with one another. In terms of accounts payables, you need to be prompt in settling your invoices on or before their due dates. If you pay your bills, your customers are more likely to do the same.

Petty Cash

While we will say that petty cash accounts are important, they should also be monitored. There is a lot of temptation when you know there is a little money left on the side. Often time’s businesses purchase unnecessary items with it, which eventually becomes a nickel-and-dime process. The best thing to do is keep it at a minimum.

Expenses and Credit Cards

Similar enemies of cash flow are expense accounts and company credit cards. Like petty cash, they are an invitation to spend, spend, spend. Expense accounts need to be closely monitored and all transactions verified, and businesses need a firm set of policies regarding the use of such resources.

Assess New Customers

When a new customer utilizes your business it’s important to assess them properly. Long term customers should have credit checks administered so you feel comfortable providing them with a credit line. If they’re considered a risk then let them pay by cash. Then again; you could put them on a credit test drive and keep them on a short leash.

9. Overhead and Shrinkage

Any small business owner knows the largest expenditure revolves around overhead. Whether it’s office equipment, tools, supplies, rental payments, excess inventory, or a host of other areas, they all count towards your overall costs. If something isn’t vital to your day-to-day operations then avoid it. Cutting back to the basics can always help you maintain positive cash flow.

Shrinkage is basically an issue where money is coming directly out-of-pocket. Whether it’s accidental damage, poor quality in a product, or even a theft problem; each of them should be considered. We recommend having better inventory control and possibly a theft prevention system to keep your shrinkage to a minimum.

10. Savings

Finally you have to consider what type of savings you can put aside. It’s an area that most small business owners forget about, but a very important part to positive cash flow. What happens if a big client can’t or won’t make their payments? You need money to pay your own bills and continue the day-to-day operations. If you budget a certain amount of money to put aside you will definitely see your positive cash flow rise.