Improving cash flow through payment behaviour

Staying on top of your cash flow can be difficult. Trying to account for expenses while worrying about the money coming in can challenge any SME owners, especially during slow periods of business.

However, there are ways you can alleviate the pressure of cash flow woes and your payment behaviour could be crucial in determining the cash flow position of your business. Below are three payment behaviour tips that can help improve your cash flow drama.

Don't pay early

It's good business practice to take the maximum allotted time to pay your suppliers. Try to think of these terms as an interest free period where you can build your receivables to cover your expenses without needing to find short term credit lines.

You should only pay early if your suppliers offer a discount and you can actually save money as a result.

Buy from different suppliers

It's a lot easier to get all your resources and supplies from the one location, but it won't always make the most sense financially.

For example, your office supplier may also sell computers, but that doesn't necessarily mean they will be the best option to make a purchase from. Do the research, look at the service and find the most cost effective solution that will work for you.

Consider leasing instead of buying

In most cases leasing will be more expensive than buying, but sometimes it can make more sense for your cash flow. The benefit of leasing is that you're not required to pay a lump sum in order to obtain a valuable asset for your business, meaning you can purchase that computer or vehicle without tying up other cash.

In some instances lease payments can also be classified as a business expense, so the tax benefits are maintained even if the item isn't purchased.

Still can't decide if you want to buy or lease office equipment? Check this article out.

Even if you have a cash flow forecast, the cash flow position of your SME can still be difficult to predict. By maintaining sensible purchase behaviour you improve the chance of a stable business operation in the instance your business runs into cash flow troubles.

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