Having access to cash is essential when it comes to the financial management of a growing company.
However, you might find the period when you have paid your suppliers but are still waiting to receive payments from your customers is a little problematic.
For online sellers, we can add the dimensions of extra fees and the time it sometimes takes to withdraw money from PayPal or Amazon.
To keep the cash flowing—and your business running smoothly—here are a few strategies to help with your cash flow management.
Keep your cash as long as possible
In cash flow management, the trick is to delay your own payments as long as possible without making late payments, and trying to make as many sales as possible to get the money back into your business.
Don’t pay your invoices early unless it saves you money. Instead, keep the cash in your company for as long as possible. Don’t think that suppliers care if you pay early; they don’t. As long as they receive their money by the due date, you should be fine.
It’s also important to be realistic when managing cash flow inconsistencies. Look at the history of your business and don’t put yourself into situations where you already know you might not be able to pay your invoices. Also, remember to take into account that seasons can affect your sales. For instance, online sellers know summers can often be a bit slow, while Christmas is a boom.
No matter how much time you spend managing your cash flow, there will be times where you’re in need of cashLook for funding
Some sellers can pre-empt inconsistencies by looking at alternative funding sources. iwoca, a company in the U.K. that provides small-business loans for online retailers, is a good option to start with. It can preapprove sellers for loans and get funds into their accounts the same day.
Anita, who runs her eBay shop, source4bits, alongside her website under the same name, took out a short-term business loan to grow her sales.
By taking a business loan from iwoca, she and her partner were able to add new product ranges and buy larger amounts of stock. This not only increased their net profits, they also saw their sales grow much quicker than before. The working capital gave the duo the opportunity to be more competitive. Anita tells us sales grew by 20 percent in total during the period of the loan.
Be proactive
We know, though, that no matter how much time you spend managing your cash flow, there will be times where you’re in need of cash. This doesn’t mean you have a bad business. It’s simply proof that cash flow management will never be an easy job.
To make it easier on yourself, communicate with your suppliers or other creditors at all times. If you are late on a payment, let them know. Most companies will be willing to work with you as long as they can see that you’re trying.
Also, consider securing funds early, so you don’t risk missing out on a great trade deal or paying large amounts of interest on late payments with your suppliers.
Cash flow management doesn’t have to be a challenge. By being proactive and planning for the future, you can help alleviate the stress associated with keeping your balance sheet in check and ensure you make a healthy profit.
