There are many metrics that business owners have to monitor to gauge how successful their venture is. Keeping a close eye on the financial side of your business is vital to achieving your long-term growth goals. One of the main indicators of how well a business is doing is cash flow. This is a term used to describe the amount of money going in and out of a business.

Cash flow problems account for nearly 82% of small business failures in the United States. Rather than allowing mistakes regarding how to collect and disperse money sink your business, you need to focus on improving cash flow. Here are some things you can do to accomplish this goal.

Offer Incentives For Early Payment

Inexperienced business owners tend to underestimate how much of an issue late or non-payment can be. If you are doing tons of work for customers who simply don’t make paying you a priority, it can seriously affect the financial health of your business. Rather than allowing these payment issues to persist, you need to devise a plan to address this problem.

Offering your customers discounts or perks for paying their invoices early can be effective. You also need to develop and carry out penalties associated with late payments. If you want to mitigate the risk of providing credit to new customers, you need to run credit checks. Choosing to offer credit to a customer with a bad credit score can be risky. The more you know about a customer’s payment history, the easier it will be to avoid late or non-payment problems.

Increase Your Prices

Keeping prices competitive is something most business owners are concerned with. Some business owners ignore the need for a price increase even when their competitors are charging far more for the same products/services. Making this mistake can negatively affect your business and its cash flow. This is why you need to raise prices when the market is giving you signs that this change is needed.

Experimenting with different price points is the only way to see how much your customers are willing to pay. Polling some loyal customers is a great way to figure out what they are willing to pay. With this information, you can raise prices without the fear of losing clients.

Take a Look At Your Inventory

If you run a business that specializes in selling goods to the general public, you need to make sure inventory waste is not affecting your cash flow. Before ordering more of a particular item, you need to make sure it is actually selling. Having a warehouse full of inventory that isn’t selling is wasteful and can get in the way of improving your cash flow. There are tons of software programs designed to make managing inventory easier. With this technology, you can keep a close eye on your inventory.

Do you need assistance managing the financial side of your business? If so, JTC CPAs are here to lend you a hand.