Cash flow - we all know what this means. It’s the total amount of money coming into and out of your business. Every business brings in money on sales and spends money on expenses. What’s important is having an idea how much cash is coming into and out of your business on a regular basis, where it’s going, and why. The idea of cash flow is easy to grasp, but maintaining a positive cash flow for your business is another story. What can your business do if you find yourself in cash flow trouble?
Create & stick to a budget.
Take the time to work with a professional and sit down to create a budget and financial plan for your company. Lay out your expected costs, estimate of sales for the month, and anticipated cash flow available. Once you have projected what to expect for the month, stick to your budget to stay on track. Emergencies arise and unexpected costs can occur, so plan ahead for these by having a savings account with additional funds for allocation where and when necessary.
Review your financial reports and determine where your company can cut costs. By saving money on expenses, you’re, as a result, going to have more cash available on hand. Do not cut expenses that are vital to your company to simply save some money. Make sure this is something your business does not need to advance forward or else you’re actually doing a disservice to your company.
Send invoices promptly.
Stay on top of your A/R by sending invoices as soon as possible. In theory, the sooner you send the invoice, the sooner the vendor/customer/client will pay. You can also offer incentives, like discounts, to vendors/clients who pay by a certain date.
Review your A/P strategy.
To keep your money for longer, try stretching your A/Ps. By waiting to pay your bills, you are allowing your available cash to build up from revenue. However, it’s important to not miss payment deadlines, as this can hurt your company’s credit, result in possible fees, and damage your working relationship. If possible, see if any of your service providers offer incentives or discounts for paying in a lump sum versus monthly, and so on.
Want more money? Make more money! Your business has the option to raise your prices or upsell. Are your prices at market value? Are you under or overpricing your products/services? Another option is to get loyal customers/clients to purchase additional products/services by upselling! Because you already have established rapport with them, they’ll be more likely to trust your company and buy more from you.
Accept all forms of payment.
By accepting various forms of payment, this caters to more customers/clients/vendors. Someone who only pays via check may not want to purchase your goods/services if you only accept cash payments.