This post by Stephen Loy originally appeared on the Louisiana Technology Park blog.
Your top priority as a business owner has to be to keep the money flowing in, because you can’t provide a great product or service if there’s no cash to support your endeavor. A 2014 report by CB Insights highlights this, noting that the second most common reason startups fail is because they run out of cash.
“Think of your financial statements like a group of friends. Cash flow is the friend whose advice we never want, but know it’s what we need — and it will always be the brutal truth,” says Walt Jones, principal of SEQ Advisory Group, a strategy and management consulting firm in Washington, D.C.
Here are five tips to help you better manage your money and keep the cash flowing in as you grow your business.
Make It Easy to Pay You Quickly
You should avoid any roadblocks, big or small, that could give a client an excuse to wait to pay. Set up incentives and automation that will help people pay you faster.
“Talk with your bank about online invoicing solutions,” Jones says. “This will give your customers the option to pay online as well as receive reminders when invoices are past due.” You can also offer auto-payments as an option.
Accepting credit cards is faster and more convenient than paper checks, and automated payments allow you to forecast better because you know you will be receiving payments at a certain time on a regular basis, Jones says.
You may also want to consider offering discounts for early or full payment as another incentive for people to pay you quickly.
Seek Out the Best Deals
No one wants to pay more than they have to for anything, and buying things for your business shouldn’t be any different. So look for discounts from suppliers or work out payment plans with extended due dates if possible.
“Ask about volume discounts and retainer fees for service providers,” Jones says. “If you can establish a relationship and demonstrate to the vendor that this could be a long-term business arrangement, it’s a great opportunity to get favorable rates.”
Also, look for any method of cutting costs that won’t sacrifice the quality of your product or service.