Running a company is a process that’s supposed to earn you money, yet, even the most low-cost of businesses (simple drop shipping e-commerce operations) have some starting costs. Most other business models come with regular costs (a lease on office space, employee salaries, utilities and more). In other words, you need some operational cash flow to keep it all running and there are ways to make this more reliable.
1. Conduct a credit check on customers
A lot of businesses find themselves in need of a debt collecting agency when, in reality, they were supposed to think about this problem a lot earlier. One of the ways to avoid this problem is to conduct a credit check on customers, especially if you’re in an industry with an unusually large value of an order and have a payment system that comes in many credit payments. Sure, this may take a lot of time, effort and resources, yet, it can help you avoid the scenario in which your credit payments aren’t arriving in time, or aren’t arriving at all.
2. Hire a debt collection agency
Previously, we’ve mentioned the fact that it’s best to avoid the need to collect debt, if possible. However, the problem lies in the fact that, sometimes, such a thing won’t be a possibility. Think about it; every person with a bad credit history has had one point in their life when their credit history was still flawless. In other words, just because they were always responsible when it came to their payments in the past, that doesn’t mean they’ll keep up with this practice in the future, as well. In that case, you might be compelled to hire services of a debt collecting agency. Fortunately, this practice is nowhere near as bad as it sounds, seeing as how it comes with numerous benefits of its own.
3. Sell invoices
So far, we’ve talked about credit payments that are either late or not coming. However, what if these payments are coming in time, yet, you need the entirety of the money right away. In that case, you might want to try and sell some of those account receivables. This is a scenario where you get to sell your invoices to a factoring company and get the majority of their full value right away and a small part once the factoring company receives the money. Of course, they keep a small fee in exchange for their service. This nonetheless is a lot closer to selling your assets than getting a loan.
4. Getting a loan
Sometimes, you’ll need the money right away, however, this might not be the money that you have on paper, like was the case in previous examples. You see, a lot of businesses simply need more cash to stay afloat before their business becomes profitable. For a business to become self-sustainable, it sometimes takes between six months and two full years, which is the amount of time that a lot of first-time entrepreneurs tend to underestimate. In this case, your safest bet may lie in the idea of applying for no security business loans.
5. Incentivize immediate payments
The last thing you need to do is encourage those who want to pay for the full value of the order (in cash or by using an electronic payment) by offering different sorts of incentives. Sometimes, this can be an additional offer to sweeten the pot, while in some scenarios, you’ll be offering them a chance to pay less. The net result will be similar to when you’re selling your invoices but the procedure will be a lot simpler and you’ll have your money even faster.
At the end of the day, improving your operational cash flow is a tricky business in which you’re bound to encounter numerous solutions, each of which has its advantages and downsides. In any case, you have a problem that needs to be resolved and you have to pay in order to solve it. Now, whether you pay a debt collecting agency, factoring company, or return interest to a lender is up to you. Just keep in mind that this is a necessary expense for your business to stay in the game.