3 Things That Keep Your Business Cash Flow Positive When You Have Business Debts
Wednesday, April 1, 2015, 5:00 PM | Leave Comment
Any business, even a well-established one, is capable of going into debt. A business with bad cash flow will usually compel you to take out extra credit to keep the business going. Things could get so bad that you are required to use your personal credit cards on your business.
Incurring more debt is not going to grow your business. It will, in fact, get your business into more financial strife.
To get back on a positive growth path, you should start by getting rid of debt.
Learn more by visiting a debt relief company that can craft a good debt recovery plan for your business.
There are ways that you can keep your business running even when you have bad cash flow. You can do the following to keep track of what’s coming in and going out of your account and ultimately prevent your business from falling into debt:
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Insist on part payment upfront to get client commitment
How you draft your contracts will impact how you make your money. If you usually handle medium to long term projects, your contract should require your suppliers to make payments gradually. Your contract should stipulate half upfront payment and final payment on delivery.
This is because there are many variables that can impact the timelines of projects and if your customers have not put down a cash commitment, you will have spent money that you will not be able to get back.
It is unwise to dig into your margins to fund projects. Your margins should be used for other purposes such as expansion and marketing.
As such, try as much as possible to work with your client’s money to complete your projects.
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Don’t take on projects you can’t handle
Small projects will keep your business going by providing the necessary cash flow. If you tie up all your time and financial resources on multiple large projects, you might need to borrow more which could expose your business to huge debts.
Big projects are enticing but they take more out of your business. Therefore, unless your business can handle the strain occasioned by large projects, focus on the small ones first. There’ll be plenty of large projects in the future.
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Make before you spend
If you find yourself spending money in order to make more money, you are gambling with your business finances.
Allow your business to experience organic growth first, before you start spending on costs that will generate more cash. This way you will be stimulating growth using money you have already made.
You should be keen to spend only when your invoices have cleared. This will prevent occurrences where you have to dig into your personal finances to fund business expenses or to reinvest.
By doing the above, your business will get back on the growth path and out of debt within a short time. You have to take time to reassess how you run your business; otherwise all your investment will go to waste.
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