Positive cash flow is critical for small businesses to fund day-to-day operations and meet financial obligations. When cash flow suffers a company is in jeopardy of eventual failure. If you’re a small business owner or manager, here are 10 ways you can help ensure your cash flow remains positive.

Great Customer Relations

Perhaps the most important thing you can do to keep cash flow positive is to develop good customer relations. When customers think of you as both a business partner and a friend, they are more likely to be prompt in paying their bills. They don’t want to sour the relationship any more than you do, so they will give priority to your invoice.

2. Be Flexible with Customers

Part of good customer relations is being flexible with customers who do run into financial trouble. If you have a client who has been with you for several years, and with whom you have developed a relationship of trust, you may be able to extend their payment deadline for a few weeks in the event of unexpected circumstances. However, if the customer continues to struggle financially it may be beneficial for both of you to end the relationship sooner rather than later.

3. Proper Invoicing

Gone are the days of doing business on a handshake. Nowadays it’s far too easy for customers to be lax about paying their bills, especially when vendors are not diligent about their invoicing and bookkeeping procedures. Every small business should have a set invoicing system in place which is adhered to consistently.

Proactive Sales Ledger Management

It’s very important to be proactive when it comes to debt collection. Just by making a simple phone call to a customer that is behind on his or her bill will normally do the trick. It’s a gentle reminder of the balance due, which can be used in a way where it doesn’t damage the overall relationship. If you let a past-due balance linger then the resentment will begin to build. The customer will being to experience fear of you calling, which turns into a recipe for disaster.

Purchase Ledger Management

It’s also possible for the roles to be reversed. Any company who wants to make a good name for themselves will settle their invoices promptly. This means paying either before the due date or the day of, but never late. If you’re willing to pay your bills on time then customers are usually willing to do the same.

6. Petty Cash Accounts

Just like the money we carry around in our pockets, petty cash is often a temptation to spend money on things your business does not need. It’s also easy to lose track of your expenditures and not realize that you’re nickel-and-diming yourself to death. Keep petty cash accounts to a minimum, and require authorizations to insurer expenses are monitored.

Expenses and Credit Cards

While petty cash can become an issue, these two areas are just as detrimental to your positive cash flow concerns. They are both invitations to spend, spend, spend, which is why they have to be closely monitored. All the transactions should be verified and a firm set of policies should be in place.

Review New Customers

Considering carefully the payment terms for new customers is critical. If you are engaging new customers with whom you plan a long-term relationship, a credit check may be in order. Any customers who you suspect to be a credit risk should always pay cash or be kept on a short credit leash.

Dealing with Costs and Shrinkage

Dealing with overhead costs is the biggest chunk of money you have to consider. This pertains to everything from office equipment and rent, to tools, rental payments, and even excess inventory. Once you take a look at all these areas we recommend cutting out the things that aren’t needed for day-to-day operations.

Shrinkage is basically an issue where money is coming directly out-of-pocket. Whether it’s accidental damage, poor quality in a product, or even a theft problem; each of them should be considered. We recommend having better inventory control and possibly a theft prevention system to keep your shrinkage to a minimum.

Room for Savings

Although it’s very rarely talked about in the business world, savings are just as beneficial to small businesses as they are to individual consumers. A cash reserve account is a good way to ensure positive cash flow during downturns. Reserve cash will also help you meet your obligations if you should have several big clients who fall behind on their payments.

Learn more about outsourced payroll by stopping by Harry Turnbull’s site where you can find out all about payroll services and what they can do for your business.