I recently shared three smart moves a business owner can take in 2020 to boost cash. Well, you know what? I’m not done— and these moves might be even smarter than the ones before. If you’re running a business, here’s what you can do to increase your cash flow.
Move #4: Make It Easy For Your Customers To Pay
When it comes time to pay their bills, some customers – at least some of my customers – get creative in finding ways to delay. Maybe they “misplaced” their invoice. Or they have a question. Or the dog ate their credit card. Or they can’t find their checkbook (yes, their checkbook!). The list goes on.
I used to get frustrated, but now I realize that people are just people, and some will look for any excuse to get out of paying their bills. So it’s my job – and yours – to make it as easy as possible for your customers to pay. Don’t mail invoices— email them. Don’t just accept checks, also take credit cards, mobile and electronic payments (yes there are fees, but isn’t it cheaper to have the cash in the bank rather than spending money collecting it?).
Make sure customers can pay with a click when they receive your invoice. Take advantage of software that gives your customers an easy access portal to view their invoice history and make online payments. Leverage technology to get reminders and send out automatic emails to help guide them through the payment process.
All of these actions are designed to make it as easy as possible for your customers to pay you. If you don’t make it easy, some will take advantage. And when they do, your cash flow will suffer.
Move #5: Leverage Tax Reform
Regardless of whether you supported or opposed 2017’s tax reform, it’s tough to argue one thing: tax rates for small businesses have come down because of it. The smartest business owners I know have been meeting with their accountants to wrap their minds around all the things that changed, and even the things that haven’t, so that they can fully leverage any tax benefits that are due to them.
What kinds of benefits? Depending on your business, you might get a 20 percent deduction for your “qualified business income.” You may be able to write off up to $1 million in capital equipment this year without spending any of your cash (just finance it and put it into service). You can get tax credits for starting a 401(K) plan or offering paid time off for family leave. You can take deductions for your employees to attend training and enroll in certain healthcare plans. You may be able to put away more pre-tax money than you think for retirement or get a tax break for helping your employees out with daycare.
There are lots more, but that’s for a discussion with you and your accountant. Just remember— federal, state and local taxes are likely the biggest drain on your cash, more than any other expense. The business owners I know who are smart about their cash flow are also smart about their taxes.
Move #6: Re-Visit Factoring
Accounts receivable “factoring” has gotten a bad rap over the years. But it’s unfair. Businesses have been factoring their open invoices since ancient times. Factoring is just another term for financing. When a business factors its invoices, it’s basically selling them to another company who – for a fee – is assuming the responsibility of collection. Just because you factor doesn’t mean you’re facing hard times or cash flow struggles. In many cases, it just means that you’re being smart about your cash.
If you use a good factoring firm – like BlueVine, for example – you can sell individual invoices to them and get the cash upfront.
“More and more small business owners are discovering online business lending. In fact, roughly a third of non-employer firms turned to online lenders for financing, according to a 2018 Federal Reserve report,” BlueVine’s CEO Eyal Lifshitz told me when I wrote this Inc.com article earlier this year. “Factoring is not about collections. It’s about allowing you to access capital through your unpaid invoices.”
Think about it. You’ve got invoices open from customers – large companies, foreign companies, the government – that notoriously take a long time to pay. Why not get the cash now and put it to better use? Factoring firms like BlueVine leverage cloud technology to submit invoices, get quick approvals and turn around cash as fast as 24 hours. They also set up lines of credit so you can just pick and choose which invoices you want to factor and get the funds even quicker.
Having cash in the bank is better than waiting for it, even if you have to pay a fee to get it in quicker.
I hope these additional ideas help you generate even more cash in 2020. I know they’ve helped me and my clients.