Tax season is one of the most difficult times of year for any business. If you are going to owe additional tax on the income you earned during the previous year, this season becomes even more stressful. To ensure that you have the money on hand to pay your tax bill, keeping your tax flow on track during this time of year is essential. Here are five ways you can keep your cash flow healthy during tax season.
- Give incentives to customers who pay quickly.
One of the best ways to boost your business' cash flow is to collect payments from customers promptly. To encourage customers to pay their bills quickly, reward them for early payment. For example, you may provide a small discount to customers who pay up front or submit payment by a certain date after receiving an invoice.
- Send invoices right away.
Most customers won't pay what they owe until they receive an invoice from your company. To ensure that customers pay as soon as possible, send all invoices immediately after the sale. Make sure you ask customers to update their contact information regularly so you can be sure you are sending the invoice to the right place.
- Don't pay your bills until the due date.
When you are trying to maintain a healthy cash flow, you want to keep your business' money in your possession for as long as possible. For this reason, you should avoid paying your own bills early. Instead, don't make payments on these accounts until shortly before the due date.
- Collect overdue accounts.
Most of your customers will pay their bills on time. However, some may fail to pay what they owe before the due date. Although you may be hesitant to pursue collection action against these customers, ensuring that all of your customers make their payments is essential to maintaining good cash flow during tax season. Be proactive about calling customers with overdue bills and/or sending them notices. In many cases, a customer has simply forgotten about his or her bill and a quick reminder is all it will take. For customers who continue to avoid making a payment, more aggressive collection action may be necessary.
- Don't make unnecessary purchases.
During tax season, you should avoid making any unnecessary purchases that could damage your cash flow and make it difficult for you to pay your tax bill. Before making any purchase, consider the effects on your finances, as well as whether you could put the purchase off for another time.
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