12 Ways To Improve Your Cash Flow
There’s a saying in business, “Cash is king”! A business can make a lot of sales, be growing, and yet still go broke. Why? Cash Flow.
Improving your cash flow not only makes it easier to plan and budget for future growth, but it also gives you the money you need to handle day-to-day business fluctuations. From staying on top of accounts receivable to extending lines of credit. Here are 12 Ways to manage the money flowing in and out of your business.
- Invoice for your sales immediately - Invoice on the same day of delivery or purchase. Billing in advance is even better. Make this a habit or part of your company policy.
- Make it easy for customers to pay you via your online accounting system or invest in a system that accepts credit/debit cards - Offer direct deposit and an electronic bill payment service such as B Pay. Each invoice should set expectations of when payment is expected and the consequences of late payment.
- Take deposits or prepayments - If appropriate in your industry or with your customers, deposits or pre-payments can work well. This practice is used more often in the services industry when the customer pays a deposit for future services or products.
- Set aside some time every week to review your debtors (accounts owing to you) - Follow up via phone, followed by text, email, and then send a statement as often as necessary to get the money in as fast as possible.
- Increase your prices and or Upsell - You should review prices from time to time. If this worries you, then do it one product, service, or group at a time. What can you sell or offer that customers need after buying their first product? Every product can have an add-on service such as maintenance.
- Offer fixed price packages - What can you offer or sell monthly, quarterly or annually? This works for both products and services.
- Get rid of products and services which are not profitable - These items drain your bank account and suck away your time.
- Don’t buy too much stock - There is a fine line between having too much or too little stock. Too much stock that is not moving off the shelves quickly will harm you harm your cash flow. If possible use an inventory management system to assist you with this.
- Lease, don’t buy your equipment - Lease your vehicles, other equipment and computers rather than buy outright. By paying small increments you get the latest equipment without tying up all your cash. An added bonus is that lease payments are a business expense, and thereby can be written off.
- Review your costs - Focus on recurring monthly, quarterly or annual expenses. Can you cut back on utilities, rent or payroll? Are you spending money on subscriptions or services you’re not using or insurance you no longer need? Can you renegotiate the terms of outstanding loans or leases?
- Paying Invoices - Unless there’s a discount for paying early, pay your invoices on the latest possible date without risking late fees or harming your relationship. This keeps the cash in your account for as long as possible.
- Monitor your cash flow regularly - Work with a proactive accountant, who uses online accounting software and can assist you with regularly measuring your cash flow position with a cash flow forecast.
Since 1995, Westwoods BGA have been successfully advising business owners just like you to help them improve their cash flow, grow their revenue and ultimately increase their profits. Our highly trained team prides itself on delivering proactive advice in a caring and personal manner. We take the time to listen and understand your business, providing step-by-step practical advice, as well as the tools and support necessary to grow your business. Having an independent and fresh pair of eyes come in and look at your business—especially cash flow which is its lifeblood—allows opportunities for improvements to be identified.
So, what should you do about it? Take action!
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