Invoice quickly. When you are owed money for a job you completed, one of the most important things you can do is to invoice promptly. Set time aside to deal with invoices each week and keep a tracking record. Include your terms and conditions on the invoice, especially the date the payment is due. If you delay your invoicing, you immediately create a weak point of cash flow in your business. And if you delay your invoicing by several months, the customer may have moved away or gone out of business, making it harder for you to get paid.

Use a factoring company. If you have ever asked yourself what a factoring company is, you may find they can help you significantly improve your cash flow. A factoring company will chase invoices and manage situations where people do not pay on time. It saves you a lot of work, but most importantly, it can help you get your business on track with strong cash flows. Some are industry-specific, so they have in-depth knowledge of a sector. They do take a commission from invoices they chase, but it improves your finances in the long run. Invoice factoring is a priority if you find it hard to keep on top of your payments.

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Take a deposit. If you have clients requesting large jobs, take a deposit upfront so you can pay for material and ensure you have a good cash flow to pay wages. This works well when you have to order things in advance, such as construction materials or a service like a wedding. If there is a cancellation, your loss is minimal. If you have a long project coming up, take a deposit, but also schedule an interim payment so you can keep your cash flowing — and ensure it is in the details of the contract.

Lease in place of buying. Another good way to keep your cash flow in good shape is to lease equipment or premises instead of buying them outright. Usually, one-off costs for expensive equipment eat into the cash flow and are expensive. By leasing, you spread your costs using smaller payments and you can also avoid large maintenance costs. And there’s another bonus — leasing costs are tax-deductible, so can be offset against your expenses.

Join a buying co-operative. Purchasing goods can be expensive and drive up your costs. As a single business owner, you have relatively little influence on price negotiation and may have to buy a large quantity of an item to get what you need for a job. All this influences your cash flow in the business. Purchasing co-operatives are when a group of like-minded businesses collaborate so they can share costs and negotiate from a stronger position. Examples include stationery and office supplies, construction materials and other items that would otherwise eat into costs.

Offer discounts for early payments. Encouraging early repayment initiatives is a great way to give the customer a good deal and also keeps your cash flow healthy. You most probably have a time window of up to 30 days for the customer to pay their bill. Giving them an opportunity to settle within seven days for a discount could be very attractive — and hopefully will encourage them back with more business.

Review your business. One of the most important things to do when managing cash flow is to review your business model and the processes. Are there any unnecessary stages in processing invoices and sales that can be taken out so you get paid faster? Can you see any times of the year when you are having to pre-order goods that are affecting your finances — and that could be spread throughout the year? Another area to consider is staff costs, so reviewing them to ensure you have the right skill mix to do the work will help utilize your payroll budget effectively. Examples include times of the year when there is high demand for vacation leave and where you may need interim cover. If this was spread evenly through the year your cash flow could be more balanced.

By managing your cash flow effectively and using resources such as invoice factoring, you can operate your company in a more economical way. Your cash flow will work to meet your requirements and not leave you with large gaps in finances.

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The post 7 Ways to Ensure Your Business Has Strong Cash Flow appeared first on Paragon Strategic Staffing.

Cash Flow.

In fact, the need to meet payroll in advance of collecting receivables has put many staffing companies out of business. Bad debt, a slow-paying customer, or even rapid growth can all tax your working capital beyond its limits.

When you started your staffing agency, obtaining a line of credit from a bank to help with cash flow may have been a logical choice. Today, staffing owners can take advantage of the increased specialization in the lending and funding world to achieve greater flexibility and, in some cases, a more cost-effective solution to their business needs.

Let’s look at the some of the ways to address your cash flow needs.

Option 1: Traditional Banks

Banks really don’t understand the industry. We don’t have brick-and-mortar or other tangible assets they can lend against. While many banks will offer a line of credit supported by receivables, they will typically only lend up to 75% of the receivables’ balance, up to a fixed limit. And if you don’t have a multi-year track record as profitable business (and a strong balance sheet), they won’t touch you at all.

Most staffing firm owners perceive bank financing as  less expensive, but in reality, the total costs can be much higher and difficult to gauge; there are usually application fees, examination fees, unused line fees and required covenants that you will be required to hold to and report on. Beyond that, there are certain circumstances where bank financing will not work:

1. When you are growing very quickly. The unfinanced receivables that the bank doesn’t cover has to be funded somehow
2. When you need to take on a new major account. Banks like to have a history to rely on.
3. When you have customers (like Fortune 500 companies) that take 60, 90 or even more days to pay. Most banks will exclude receivables that are in excess of 60-90 days.
4. When a major account defaults on your receivable.

In all these situations, you’re likely to need more than 75% of your receivables balance in working capital in order to keep your doors open.

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Option 2: Credit cards and Personal Lines of Credit

While credit cards and personal lines of credit have been used by entrepreneurs everywhere to fund startup operations, they are generally inadequate to support the growth of a staffing business. The cash flow demands are simply too great and the risks too high.

If you are in a rapid growth situation, none of these solutions will allow you to scale your payroll, and ultimately, your lack of access to working capital will put your business at risk.

If you need financing because of a slow-paying or high-risk customer, these options could put your future personal financial well-being at risk.

Option 3: Funding Companies

A funding company provides working capital (and often other services) to businesses. They will purchase your receivables at the time you send your invoices, so you get immediate access to the cash you need to pay your payroll. The funding company then takes care of collecting the receivables, and they will charge you a percentage of the invoice value for their services.

While some funding companies fund 100% of your receivables, a typical funding company will give you instant access to 80-90% of your receivables. They hold back the remaining percentage until the receivables are actually collected. Once collected, they will pay you the remaining balance, less their service fees.

Fees can range greatly, and the cost will vary by provider and the riskiness of your business (i.e., the specialty niche markets you serve, the type and size of customers you have, and your firm’s credit history).

The biggest advantages of funding companies include:

• Immediate access to cash to finance payrolls.
• Greater scalability – no limit to your growth.
• A partner in assessing customer credit and managing collections.

Beyond Cash

While options one and two get you access to a line of credit that can be used to fund payroll or for other purposes, cash is all you get.

Back office services. In addition to funding, a premier provider offers a full range of back-office support services that relieve staffing firms of significant amounts of administrative burden, so they can focus more time and energy on sales and recruiting.

These additional services save time, ensure accurate processing of invoices, payroll and payroll taxes, and keep you in compliance with federal and state payroll regulations.

Cash flow is essential to your growth. When deciding on a bank or funding company, look for a firm that specializes in the staffing industry — one with a long history of supporting organizations that are similar to yours. Look for a firm that is committed to helping you become more successful.

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