Tips to ensure that your business has a positive cash flow

Your business can stay afloat if you infuse regular funds in it – and this is easy to do if you know the right tricks.

You achieved your dream of starting your own business a few months ago. You have good co-workers, solid plans for the future, excellent business prospects and good revenues. But there are times when you face a severe cash crunch, when even paying your staff or paying for office supplies becomes difficult. Not getting steady business is detrimental to the growth of your company, and you rack your brains on how to get past this frequent problem.

There are ways to do so, and improve your cash management process as well. Here are 5 ways to improve your cash flows:

1 Dispose off what you don’t need. Make a list of all the ways that you can reduce your outgo and save company money. You might need to take some hard decisions, but they will help you improve your cash management. For instance, if you do not require a large office space, you can save on rent by getting a smaller space and asking employees to function from remote locations. Or you can sell items in the office you do not use – working computers, crockery, furniture, stationery, even an old car. You can generate some useful cash from these measures.

2 Diversify your business. Instead of following a tried and tested approach to your line of work, why not try a new approach? If you have an office that is next to a cultural centre or a bookstore, for example, you can rent out extra space on weekends to people looking to stage an event. Or if you are a graphic artist, you can take on school and college art projects as well. All in all, if there is potential to tap your expertise to take the business in a new direction, it will result in extra income for you.

3 Incentivise payments. You have little or no control over the payment cycles of your clients. Some follow a 45-day cycle while others might pay you three months after submitting your bills. However, not receiving money for a long time can upset your cash flows. Instead, be a smart cash manager – incentivise early payments by offering a discount on the bill or a free service. Clients would certainly like to avail of a discount on the bill – in return for cutting a portion of your profits, you end up with regular cash flows.

4 File your taxes on time. Many companies are surprisingly neglectful of their taxation duties. It is imperative that all service tax, VAT, income tax and other cesses be calculated and paid on time – not doing so results in stiff penalties and fines. Employ a vigilant cash manager or entrust the job to your chartered accountant. Present all bills with Service Tax and Swachh Bharat Cess (SBC) included and ask for TDS certificates from your clients every financial quarter. Filing returns and paying taxes on time also improves your credit score, which helps when you need to take business loans.

5 Cut down on everyday expenses. You can pare down everyday office expenses when you make a list of the unnecessary ones. Switch to a lower grade of office supplies to save costs, be mindful of wasteful power and Internet usage, hire just one office assistant if two are not required, and set up a small office space in your home if you don’t need a large office with a staff. Cutting down on all these expense heads generates a larger income for your company.