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Avoiding a Cash Flow Crunch
A sudden unexpected expense can throw off even the most carefully thought-out business plan. Maintaining a cash contingency fund is one way to be prepared for emergencies, but it requires having cash sit idle. A more flexible solution is to make sure you have access to credit — before it is needed. Your RBC small business advisor can arrange a flexible credit solution that will meet your needs, as well as the needs of your business.
Tips to improve your cash flow
- Understand your sales cycle
Identify peak income periods and slowdowns, so you can plan your expenditures to match the periods when you have cash available.
- Manage expenses.
“Money out” is just as important as “money in,” when it comes to cash flow. Be on the lookout for ways to reduce discretionary expenses.
- Collect from customers on time.
By invoicing customers regularly, depositing payments immediately and following up with customers on late payments, you can improve cash flow significantly.
- Negotiate supplier terms and maximize supplier credit.
You may be able to negotiate longer pay periods with key suppliers. This additional flexibility can come in handy if cash flow gets tight. In order to maintain good relations, be sure to speak with your suppliers personally and get their buy-in up-front.
- Keep inventory at reasonable levels.
You want to be prepared for customer demand, but too much inventory can tie up your cash
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RBC has developed a series of guidebooks that offer concise, practical information for all stages of your business. Click here to obtain a complete set of all our guides.
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