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Cash is king – or, more accurately, if you’re a small business,cash flow is essential to keep your company in business. Managingthe flow of cash in and out of your business can literally make orbreak its future.

Yet cash flow management is mired in mystery for many smallbusiness owners (SBOs). If you fail to track and record the billsyou pay, or are less than prompt about invoicing customers, youcould probably benefit from a review of the practices you use tocontrol cash flow.

Cash flow management can be broken down to two areas of concern:cash in and cash out.

Cash in

You can provide a great service or outstanding product, but ifyou can’t get your customers to pay you – in full and quickly -your small business is almost certainly doomed to fail. With manysmall businesses facing escalating expenses, keeping money flowingin a steady stream is essential.

There are several tactics you can use to encourage customers topay quickly, and to limit your exposure to those who are habituallyslow to pay.

* Consider offering nominal discounts for prompt payment. Ifyour invoices are due in 30 days, sweeten the attraction of payingpromptly by offering a 5 percent or 10 percent discount for paymentin 10 days.

* Monitor your clients’ use of credit. If a few of yourcustomers have a sketchy credit history, you may want to keep atight rein on how much credit you extend to them.

* Consider requiring deposits for work in progress. This isespecially helpful if the project will require you to put out somemoney – for supplies, extra staff, etc. – in order to completeit.

One of the most effective ways you can keep cash flowing intoyour business is to make it easy and fast for customers to pay youby offering a variety of payment options, such as credit card,eCheck, debit card and acceptance methods including online,in-person and over the phone. A 2010 study by Javelin researchindicates that seven out of 10 American households already pay bills online. With online payment gaining in popularity, itmakes sense for SBOs to offer this option to their customers.Offering multiple payment options can also influence customers topay faster.

Accepting online payments doesn’t have to be complex. Serviceslike American Express’ AcceptPay, an online payment acceptancetool, allow SBOs to offer customers various acceptance methods,including online, on phone and in-person. Credit card, eCheck (ACH)and debit card payments can be directly deposited into thecompany’s account, shortening lag times between when a customerpays and when the cash actually arrives in a small business’account. What’s more, standard and custom reports provide acomplete view of funds. And tools like automated payment remindersto customers, or automated recur billing, make it easy to gentlykeep customers on time and on track with their payments.

Cash out

Speeding the flow of cash into your business is only half thestory. You also want to slow the flow of cash out. There areseveral ways to do this, but remember, you will often be dealingwith other small businesses, which will see the benefit of offeringincentives for you to pay your own bills quickly.

* Check with suppliers on their credit terms. If a supplier orvendor will offer you a discount for paying before the bill duedate, it might be worth it to pay a bill early. Or, if a supplieroffers 60 days same as cash, it may make sense to delay paying aninvoice in full.

* Consider renegotiating key contracts. The recession hasinspired many businesses to be more flexible in their dealings witheach other. If you have service contracts – or even a buildinglease – you may be able to negotiate more favorable terms if theother party is feeling the pinch of the recession and wants to keepyour business.

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