In order to run a successful business, you need to have an intelligent mind, good management, productive staff and, of course, steady cash flow. A business cannot thrive if it does not have cash flow. While running a business is all about taking risks, your cash outflow should never be more than your cash inflow. So, here are a few accounting-related tips that will help you maintain adequate cash flow for your business:
Tip #1: Sign Payment Contracts
It may seem easy to conserve cash flow for your business; however, if it is not done properly, it can backfire on you. You need to be able to convince your customers and your vendors to enter into specific payment contracts with your business.
With vendors, you may want to negotiate a contract with them that will have them supplying you with commodities for one month after which you will then make your payment. This allows you to sell and make profit off those products before you even have to offset the debt. As for your customers, you would want to convince them to enter into an agreement with your business where they would make payments before receiving the product.
Tip #2: Sell Capital Equipment That's No Longer Needed/Wanted.
As a modern-day business owner, it is necessary to keep your mind turning like a clock. You constantly need to be looking for what your business needs and wants as well as what is currently obsolete in your business. In today's high-tech era, the requirements of your customers change just as often as the materials used to produce products. Therefore, it is imperative that you dispose of any business equipment that you no longer use and need in order to open up additional space for more modern equipment that could prove to be more valuable for your business.
Tip #3: Require Deposits Be Put Down on Large/Custom Sales
If your business produces large or custom orders, it may be a good idea to have a condition that requires customers to put down a deposit on these orders, such as a 30 to 50% down payment before the order will start being processed. The reason for this is because, many times, the demand for these types of products aren't as high as other products. If you were to go ahead and produce the order and then the customer not pay, you may be forced to take a reduced payment for the goods, which can drastically hurt your overall cash flow.
When in doubt, contact your local certified public accountant, like Vlasac John M & Co.