Updated: Jan 12, 2019
Nowadays clients big and small are taking longer to pay as many companies are hoarding cash. Meanwhile, your business is suffering from a lack of operating capital. Sounds familiar? You are not alone. Insufficient operating capital is one of the major reasons why more than half of small businesses don’t survive past their fifth year. However there are certain strategies your business can deploy to fix your operating capital. Many of these strategies are not publicly available, but I can share a couple of them with you.
Manage your payment terms If the payment terms you have set for your customers are out of sync with the payment terms set by your suppliers, negative cash flow can build up over time. The typical example is when your customers have 60 days to pay you but your suppliers want to be paid within 30 days. The best solution in this situation would be to renegotiate terms with your customers and/or suppliers.
Ask your customers for a deposit Large orders or projects require your business to spend a substantial amount of cash up front. That might lead to cash shortages. To avoid cash crunch have your clients to provide you with working capital by asking them for a security deposit. Be consistent and build the deposit policy into your business sales model.
Taking these simple steps, and developing solutions to keep cash flowing into your business, will make you successful