When you’re a small business owner on a tight budget, it pays to save every last cent. In case you’ve forgotten just how much a hard-earned penny counts, here are five money-saving ideas from a leading Though these tips seem almost too simple, the end result could mean a bigger cash reserve for your business when it matters most.
- Extend Credit Wisely. If you extend credit to your customers, thoroughly check the client’s credit background. For not-so-creditworthy accounts, consider these options:
- Collecting cash in advance
- Require C.O.D.
- Require letters of credit or personal guarantees
- Invoice factoring (we’ll discuss this option later)
- Hire and outsource wisely. Payroll is one of the biggest and costliest expenses a business owner is responsible for. Hiring the wrong people, experiencing employment turnover, and constant training and recruiting can get expensive. It means that you have to invest in the job search process and new employee training again and again. It’s always most cost-effective to retain employees, so make sure that you hire correctly the first time. If you’re not ready to hire full-time team members, outsource certain work to talented freelancers or contractors. With more than 54 million freelancers in the online marketplace, there are many options open to you — from outsourcing your bookkeeping to marketing and advertising. If you’re struggling to meet payroll, however, you can always consider factoring services so that you have more cash on hand. Get a factoring rate quote from Interstate Capital to find out if this would be a viable option for your small business.
- Negotiate, negotiate, negotiate. In the B2B world, prices are not set in stone. If you don’t negotiate vendor contracts, then you are likely paying more than necessary. Always come back with a fair counter offer. When negotiating with new vendors always make a lower counter-offer. If rejected, you always maintain the option to continue the negotiation or seek out less costly alternative options. Reevaluate existing vendor contracts annually to ensure you’re getting the best service and goods at the lowest possible price. Keep your vendors on their toes to let them know you’re a “shopper”.
- Time every payment. It doesn’t hurt to ask your suppliers if they offer extended payment terms. Speeding up your collections and slowing your payments reduces the need for external financing. Unless your vendors offer a prompt payment discount, pay them at or near the end of the terms—but be careful not to pay late, as you may incur penalties or hurt your firm’s credit. Delaying payment as long as you can is to your advantage: the longer you hold on to your cash, the better.
- Speed up payment on invoices you issue to your customers. Make sure to invoice promptly — as soon as you deliver goods or services and as soon as permissible by your customer. Consider factoring as a means to speed up payment on your invoices. Sometimes, even the most creditworthy of customers take over 30 to 90 days to pay. A factoring company not only provides immediate cash advances against your invoices, but factoring companies also provide other money-saving services such as investigating the creditworthiness of your customers, to help you avoid bad debt. Delays in collecting customer payments may cripple business operations. By speeding up cash inflow while managing cash outflows, you reduce dependency on debt to finance your working capital needs. A factoring company like Interstate Capital provides business owners with “peace of mind” that comes with steady, predictable cash flow. Now that’s a benefit that is valuable to every business owner, big time!
Find out more about working capital solutions from our trusted factoring experts today.