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ACCOUNTING: CASH FLOW TIPS

ACCOUNTING: CASH FLOW TIPS

Here are a few quick and easy ways to accelerate your company’s cash flow

  1. Turn credits into refunds:
    • Review the Accounts Payable Aging monthly to identify vendors with credit balances.
    • Contact all credit balance vendors to request a refund check be mailed promptly.
  2. Extend vendor payments:
    • Contact each vendor to negotiate payment terms; extend wherever possible.
    • Discuss alternate payment methods each vendor is prepared to accept.
  3. Accelerate customer payments
    • For larger sales, request a portion of fees at the time the sale is initiated.
    • Schedule interim payments throughout long projects.
    • Consider offering a small discount for early payment.
  4. Electronic payments save paper, postage, and, often, manpower
    • Electronic payments can be scheduled for the exact due date, deferring the outlay until the latest time without incurring late fees.
    • You may be able to negotiate lower prices with vendors by paying promptly and electronically via wire or ACH.
  5. Accept Credit Card payments:
    • Set up the mechanism to accept payments via credit card or PayPal to have funds transferred directly into your bank account, saving the 30+ day wait to receive a check.
    • Consider the fees associated with credit card acceptance, however, before offering customers a discount for credit card payments.
  6. Business Line of Credit: A business line of credit has greater flexibility than other loan options:
    • It can be used to cover cash flow deficits on short notice (ie: to purchase seasonal inventory or to cover unforeseen operating expenses.)
    • Interest accrues only for the period the LoC is in use, and can be paid off in full regularly.
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