Long-term debt and equity financing, along with generous cash flow, may be the best options for acquiring working capital. However, not all of these options may be available to all companies. There are many other options available to business owners to provide cash flow management. Randall Castillo Ortega, a successful entrepreneur and global businessman from Costa Rica, shares his top tips for ensuring cash flow is always available.
A down payment or milestone payment is a great option for organizations whose products and services require significant cash or effort to complete. Although some customers may be reluctant to pay these types of payments due to their sensitive nature, it is possible to incorporate them into your company policies and make the process easier.
You can also encourage customers to pay faster by using different methods to monitor revenue. Castillo says: Give your customers a discount if you make their payments early. For example, you could tell your customers that they will receive a 2% discount if they pay within ten days. This is a tempting suggestion for any business as it can offer substantial savings in the long run.
Sellers are motivated to help customers buy. Two extra weeks can be the difference between getting paid on time and expanding. If you are able to request payment extensions, it is possible to extend payments. For example, if the payment terms are 15 days, you can push them to 30 days. Some suppliers may not be able to accommodate your request.
Everything should be available when money is tight. This particularly applies to unused equipment which can be sold or rented to an organization in need. It is possible to lease equipment to another organization and lease equipment that does not impact the bottom line whether it is used or not.
A merchant cash advance is a great option for almost any consumer business. Castillo explains, “This option will allow the company to obtain a loan that will be automatically repaid based on a percentage of the volume of debit or credit card transactions. This option can be very simple to obtain if the company has a solid transaction history.
Obviously, increasing margins is one of the best ways for a business to make more money. It may not be possible to do this every time, but it is something that should be considered, especially if the product or service is in high demand. This will allow you to increase your margin by increasing prices or decreasing costs. However, this could cause friction with customers, so be sure to consider this option carefully before proceeding.
Factoring or selling on invoice, also known as discounting or selling on invoice, is a flexible and efficient way for business-to-business businesses to raise funds. Invoices can be considered business assets. The product or service has been delivered, but the funds are not available until the invoice has been paid.
It may take time for some payments to be received as delays can be up to 60 days. To receive payment immediately, a company may offer to sell its invoice to a factoring company. Once the invoice is fully paid, the factoring company will receive the funds.
Castillo says any combination of the techniques above could be a viable solution for your business. Nevertheless, it is important to carefully consider each option before making a decision. Understanding which option is right for you will help you better manage your capital to help your business grow.
About Randall Castillo Ortega
Randall Castillo Ortega has been involved in the financial space virtually his entire professional career. In addition to founding the financial loan company RACO, he is also an avid outdoorsman and, along with his family, is a big supporter of the community. He regularly participates in community ceremonies and events organized to create a better environment for children and families.
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