Successfully managing the cash flow of your rental business requires the balancing of money coming into your company and the money being paid out, sounds simple, but we understand that in reality this isn’t as easy, sometimes, as it sounds. However, we all know that a healthy cash flow will make it easier to budget and plan for your future business growth.
So here are a few helpful tips, to manage and improve your cash flow:
Create a billing schedule
Keep a close eye on your accounts so that you can act on those that are past their payment due date. Issue invoices for rentals as soon as possible and provide a deadline for the payment. Issue reminders on a regular basis and take action on those that are persistently late paying. Keeping track of all payments and acting on outstanding accounts will increase your cash flow too.
Your suppliers
To give you more time to collect outstanding invoices take the maximum amount of time to pay your suppliers. Avoid late payment as this could affect your credit rating, but pay at the last possible minute so you have more time to collect outstanding invoices from your clients.
Your inventory
Check which hire items are not paying their way in your company; you will have items that are always in demand and others that are only occasionally rented out. You still have to maintain and repair the items of low demand, costing you money, so consider whether you could discard those items and increase stock of more popular goods.
Leasing or buying?
Although you are in the rental business, you could consider leasing your equipment. Leasing means that you always have up to date equipment, or vehicles if you have a car hire business. Repairs and maintenance are taken care of as part of the lease hire agreement. If you buy items outright, you have responsibility for repairs, maintenance and replacing when tools or equipment are worn out. Clients want new items, and leasing may be the most cost effective way to supply them.
Flexibility
Negotiate with your suppliers, utility providers, insurance and others involved in your company. Many suppliers will offer incentives to gain or retain your custom, and just a small discount from each supplier soon adds up.
Review your prices
Lastly, be realistic about pricing. Although the rental business is competitive, if your prices are too low, it could hold a perception by potential customers that your equipment is not as good as others, this will impact your company and you will suffer and you could go out of business. Check out the competition and review your prices regularly. Offers incentives on certain items, if you know they aren’t as popular at certain times. If you outsource accounting, your accountant will be able to help you review your pricing and improve cash flow.
If you would like to improve your cash flow, or have a system to manage your creditors and debtors more efficiently, then talk to us now. We would be pleased to have a non-obligation discussing to understand your requirements further, and illustrate how you could gain from improved cash flow to help your business grow.