So, what are the ways by which you can actually improve your company’s cash flow?
Start using retainers
If you use invoices to receive payments, then you may well do yourself a favor by switching over to retainers. Ask your for retainers from your clients and you agree to be at their service for a specific amount of time in exchange of a fee.Most of the time, retainers are paid upfront or as per a pre-determined schedule. So, if your retainer gets reimbursed on a regular basis, then it could either be made monthly, quarterly or even yearly. This would in a way ensure that a steady stream of cash flows in your business.
It may happen that retainers aren’t used in your kind of business and that they are not regarded as the standard mode of business transaction. Still, standards are flexible and can always be changed, accordingly.
Extended vendor terms
Generally, you’ll be paid after you’ve provided your vendors with the necessary receipts or your vendors will pay you against the receipts after a certain period. Often, vendors follow a particular set of terms such as 10, 30, 45 days after receipt of the bill to reimburse you. However, they may be likely to welcome any kind of negotiation from your end, if you really mean business out of such initiatives.
You may ask your vendors for an extended term (possibly without interest) so as to postpone the costs as much as possible. Apart from that, you may also ask for discounts to get immediate or pre-schedule payment. So, if the vendor agrees to provide you with a discount of 3 percent, then that will help in to improve your company’s bottom line by almost 3 percent.
Regardless of the amount of the discount doled out to you, it should always be borne in mind that every penny counts and that would leave a positive impact on business’ margin.
Opt for progress billing
If the idea of asking for retainers has failed, then you can very much ask for progress billing. Simply put, progress billing implies that a number of invoices would be made at various stages of a major project in order to receive payment for the amount of work completed till at any point of time.
Truly speaking, progress billing works much better as compared to retainer. This is also a lot preferable to the clients and will ensure that your company is well-greased as far as monetary funds are concerned, thus ensuring a continuous cash flow in your business.
Actually, progress billing is an ideal option for long-term projects that are completed on the basis of milestones. Lastly, make sure that you aren’t saddled with tax debt. Always file your taxes on time to steer clear of all future tax hassles.