Cash flow plays a very important role for business owners. Especially the ones who have just begun or entrepreneurs into their start-ups. It is a life-blood of an organization. Businesses have a host of different problems every day such as product cost, service cost, meeting sales target, customers complaints, dissatisfied employee, etc. However, effectively managing the cash flow will result in streamlining every area of your business.

Converting potential call into sales and then to cash is the ultimate strategy of any business. Also, it is beneficial to have a certain cash-crunch-fund readily available in case of any business emergency. This habit proves to be the essence of long-term growth and success.

Keep Future Surplus Ready

One has to specifically keep tab of current and past income, expenditure, cash flow statements, financial standings and balance sheet to give a probable financial projection for the next 3 to 6 months. This management system and format will help and alarm you of any shortcomings and hence, gives you time to prepare for the said cash adversity.

Better Link With Lenders

It’s hard to draw money from investors especially when your business is at low. Bankers and private lenders are least interested to fund in as they are almost looking to get paid back rather than a fund in more money. It is advisable to build relations in advance rather than to seek it in the nick of time. Banking and other financial institutions offer secured loans on such assets. Loans can be availed in different ways such as ‘Account Receivable Financing’ which is the most obvious corporate loan for a business. Moreover, Inventory and Equipment are the other two ways to opt for business loans.

Let Cash Generate Cash

Playing smart with your cash is the best plan of action you can take with your existing funds available. You can do this by opting for interest-earning accounts which offer more interest as compared to simple savings accounts, Certificates of Deposits (CD), Fixed Deposits (FDs) or money markets accounts. Try to avoid taking FD as it will block your fund for the specific period of time opted and withdrawing early in case of emergency will attract additional charges to do so.

Spread Awareness

Let your customers know primarily that the payment is immediately due upon producing or delivery of items or services. Do not proactively suggest them about the option of paying later, instead educate them about the advantages of paying on time so as to build credit and avail discounts, offers or any benefits for paying on time. Include a letter suggesting that interest will incur for all payments received later than 30 days. Clearly outlay the policy regarding late payments and as a kind reminder keep spreading the word about it.

Collaborate With Vendors

As much as it is important for you to get paid by your customers, the same applies to your vendors as they would also want their payment to be cleared as soon as possible. See what is the penalty for late payments and if it is there then try to adhere within that time frame and if it is none then set a pay cycle of 45 to 60 days from the receipt of an invoice. Simultaneously it is also important to maintain a good credit rating and business relations with vendors. Try to adhere to all payments as promised and only delay the payment as long as you are being consistent with the payment and sales terms.

Maximize Cash Inflows

It is also beneficial to increase cash inflow in different ways especially if you are offering to sell custom products or services then you can modify the contracts accordingly. If your customers require any modification in the standard products or services then you can demand extra payment through fees and other charges. Small and medium businesses who provide timely services should consider subscription sales in order to secure payments from customers in advance which is also a good way to cover your future costs.

Minimize Cash Outflows

In order to maintain easy cash trade within the company, the best step further is to cut down on unnecessary expense and reduce outgoing cash flow payments as much as possible. You could save on equipment and instead of replacing it, it’s better to get it to repair. Sometimes even buying used equipment can help you bring down office cost.

Since Cash is King for small business owners, you need an invoicing system in place which maintains a positive cash flow on accounts receivable and accounts payable.

Moon Invoice is simple in User Interface, sober in features and sophisticated for all Small & Medium Enterprise and Businesses. Designed with the highly integrated intelligent system, get all the invoicing solutions with an app to have a hassle-free business operation.

Recurring Payments Vs Recurring Invoices

Recurring Payments	Recurring Invoices
Recurring payments charge the customer’s credit card account or debit card account on a predetermined schedule for the same amount as preapproved.	Send an invoice to your customer on a regular basis. The client receives the invoice but, money is not paid unless the customer approves.
A business that takes prepayment of money and sells a monthly subscription service and product. Subscription services are excellent examples of this.	A company that provides fixed services with billable hours is an excellent choice for recurring billing. For example law firms and consulting agencies.

Pros and Cons of Recurring Invoices

Pros	Cons
You eliminate the possibility of human error by automating the billing process. If you use a recurring invoice, you will not be concerned about forgetting to charge your customers for the things they ordered.	You must exercise caution while recurring billing to prevent issuing inaccurate pricing. This also holds for price changes that could take place right once an invoice is created.
If you provide your customers with the option for recurring billing, they are more likely to buy products regularly.	It could be difficult to cope with recurring invoices if a transaction fails for any reason.

Net 45	Invoice is due in full within 45 days with no early payment discount offered
2/10 net 45 terms	2% discount if you pay within 10 days; otherwise full payment of the invoice is due in 45 days
1/15 net 45 terms	1% discount if you pay within 15 days; otherwise full payment of the invoice is due in 45 days
1/10 net 45 terms	1% discount if you pay within 10 days; otherwise full payment of the invoice is due in 45 days
1/7 net 45 terms	1% discount if you pay within 7 days; otherwise full payment of the invoice is due in 45 days

Category	Net Method vs. Gross Method	Explanation
Calculation Approach	- Applies tax credits first; reduces taxable income before computing tax liability.	- Doesn't apply tax credits; computes taxable income without considering tax credits.
Tax Credit Eligibility	- Allows for greater likelihood of tax credit eligibility due to reduced taxable income.	- Limits tax credit eligibility because taxable income hasn't been reduced yet.
Itemized Deduction Requirement	- Lowers threshold requirement for itemizing deductions due to decreased taxable income.	- Raises threshold requirement for itemizing deductions due to higher taxable income.
Advantages	- Leads to lower taxable income and increases chances of meeting qualifications for other tax benefits.	- Results in higher taxable income compared to net method.
Disadvantages	- May miss opportunity to reduce tax burden if taxpayer doesn't itemize deductions or take advantage of tax credits.	- Increases taxable income and may result in higher overall tax bill.