Cash is King! Improve your Business Cash Flow with these Strategies
Cash is the life blood of any business. There is no operating without it, regardless of whether the client will be, or even is profitable right now. Understanding what is coming in and going out is key and spotting trends that will give indications of future problems will allow you to give meaningful advice. You’ve probably heard this a thousand times but let’s say it one more time as it is one of the most important concepts with running a business – CASH IS KING! Many a profitable business has gone down in flames because its reserves have dried up and if you are thinking of selling at any point, investors will be looking for a healthy cash flow before they look for profitability. Here are some tips that may help you improve your cash flow:
- Forecast Let’s start with the most important. Having foresight and knowing in advance of upcoming problems is the best thing you can do to help with the managing of future cash flow. Luckily for you, if you are reading this, you have the best tool in the world to help you with this!
- Keep on top of your aged debtors You should check at least every 2 weeks who still owes you money. Better still, use one of the increasing numbers of automated solutions that will do this for you.
- Be careful with offering credit Not everyone is as nice as you!
- Use cards Take advantage of business credit cards that give a 21 day grace period after receiving the statement to make payment. Also, encourage customers to pay by credit or debit card. The cash comes in quicker and the process is streamlined.
- Put your cash to work The buffer you should keep will be dependent on your business. You need something to keep you safe from running out, however, maximising the company bank balance shouldn’t be what you are aiming for. Instead, think about investing this to help with future cash flows. Marketing or extra sales staff can turn cash inflow around if you are expecting a lull. Whatever you do keep as a buffer – make sure it is in an account that is earning you interest!
- Consider financing options Leasing could be an option that stops a huge amount of cash going out at once. Similarly, if cash isn’t coming in from sales fast enough to cover costs, invoice factoring could be something to consider.
- Change your revenue model If possible, move to a subscription-based recurring revenue model. This evens out your cash in-flows and makes it easier to plan.
- Sell what you don’t need Any inventory or equipment that you no longer need can be sold. Keeping it is only going to cost you money!
- Invoice in milestones that work for you If your sales are not steady and you are doing work that is billed in stages, try to line up the payments so they come in when you most need them. Also get some cash as deposit whenever possible.
- Build flexibility into large contracts Large bits of work can be affected by ‘scope creep’. Make sure you are able to charge for extra work you end up doing and let your customers know as early on as possible if this needs to happen.
Source: This article was originally produced by FUTRLI – the all in one forecasting and reporting tool.