As this article notes, it doesn’t matter if you have enough cash in Week Four if you’re too short to cover payroll in Week Three. That ill-timed shortage will completely halt your business. Unfortunately, not every business has systems in place to monitor cash flow. And consequently, many end up overextending their credit lines.

A huge benefit of AP automation, for example, is being able to have real-time visibility into your business, including tracking cash flow. You don’t want to be surprised when you realize you’re short for an expense that got overlooked in the budget.

Key takeaways for improving cash flow:

  • Utilize early payment discounts by paying your supplier sooner than required to improve cash flow at crucial times.
  • If you accept credit cards, try to negotiate the best deal you can with your credit card processor, or find a new one altogether. Credit card processing/merchant services is an extremely competitive industry—you’d be surprised by the price reductions you will get if you just ask or push for it a bit. Additionally, do some research on how to lower your interchange rates—regardless of your merchant processor. Merchant processors do not set interchange rates; since the Durbin Amendment of 2010, the government now sets maximum rates processors can charge for interchange. (However, they can charge indiscriminately for other fees.) For instance, your rates are dependent on a number of factors, including how your customers pay—via card swiped, card keyed on a point-of-sale, card keyed online and over the phone, etc. There are tons of online resources on how to lower you interchange rates.
  • Manage inventory closely- excessive inventory at low demand times can drain your cash flow at an unnecessary, and potential damaging, time. Conversely, if you’re short on high-demand inventory, you will lose that business.

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