In today’s slow economy, one of the most important things a small business can do is to keep a firm grasp on their cash flow. While small businesses are often at the mercy of customers and suppliers (especially from larger companies), a comprehensive business plan will help eliminate poor credit arrangements. Here are five essential tips to consider in any plan:
1) Check Credit : Small companies should run regular credit checks because a 'good' client could become a 'bad' customer overnight, so you might also want to set credit limits.
2) Optimize Inventory: Implement a drop shipment program with your suppliers.This is a great method to minimize the time between payment from your customer and paying your supplier while minimizing the amount of inventory you carry.
3) Invoice/Communicate: Clearly communicate your payment terms and organize your billing schedule. Consider offerring better sales terms for prompt payment - for example offering a 5% discount of future orders if payment is made within 30 days.
4) Make Payments Easy: Make it as easy for people to pay you - consider accepting PayPal. PayPal is an inexpensive option to process credit card payments.
5) Manage Late Payments: Establish a good process to chase payments and keep an eye on your customers’ payment trends in order to identify potential problems before they develop into something more damaging.