6 Ways to Increase Your Cash Flow and Grow Your Business
Cash flow measures the coming in and out of your business, and it is a crucial measure of the company’s financial health.
If your operational overhead is more than the revenue you generate, then you have negative cash flow. On the flip side, you have positive cash flow when you generate more revenue compared to operational expenses.
Your goal should always be to increase your cash flow, so you can grow your business to new heights. Here are six of my best strategies for generating more positive cash flow.
1. Suppliers and Vendors
For many businesses, the cost of goods and supplies is one of their biggest expenses. If you have a good relationship with your vendors, then consider price negotiations and even bulk pricing if you are purchasing often. By saving on these expenses, you increase the positive cash flow to your business. If you are not taking advantage of negotiation with your suppliers, then you could be missing out on product savings.
2. Spending Habits
Are you paying for goods and services that you do not really need? Unnecessary spending adds up and can cost you big. Go through (at least) the last 90 days of expense reports for your business with a critical eye and identify which purchases are necessary and which can be eliminated.
3. Become More Efficient
Pay attention to how you use your utilities, how productive your workforce is, and how you spend your time. Are there ways you could be using these resources more effectively? This could be implementing time blocking, increasing scheduling efficiencies, or even getting a smart thermostat for your business?
Also, take note of how you are spending your time and assess whether that is the most productive use of your knowledge and skills. It may be better to outsource tasks you aren’t as familiar with or good at or implement automated software and more efficient equipment. This may not produce results immediately, but over time can pay off big.
4. Get Paid Easier
Consistency is key
Be consistent with your billing. Send out invoices at the same time every month and keep due dates consistent. If you are a net 15 or net 30 company, then stick to that with every invoice for every customer.
Speaking of invoices, accounting software not only helps you keep your finances accurate and up to date, but it also helps streamline the billing process. You can set up reoccurring payments, payment reminders, and so much more. It is worth looking into if you are not already using one.
Beware of the DIY trap
Quickbooks and Xero are two extremely popular software programs, but there is a learning curve. If accounting is not something you are familiar with, then do not take the risk of DIYing it! Seek out a professional bookkeeper for your day-to-day financial needs.
Professional bookkeeping can be outsourced to a remote contractor or business services firm without the added burden of a full-time employee. A good bookkeeper will help you understand the health of your business and what steps you can take to grow your company. They should work well with your CPA to provide you the best financial game plan for growth in your business.
Keep it simple
Make it easier to pay. Setting up online payment is a great option, so people do not have to find time in their schedule to bring you cash or check or to get around to mailing off their payment. They will be more likely to pay it immediately if they have the option to do so.
Create incentives for on-time and early payments
Also, offer incentives for customers paying upfront or paying early. You can offer a 1%, 3%, or whatever percent discount you want to offer for customers who do not take the full term to pay their balance.
On the flip side, there should be penalties for customers who are late on payments. As always, there are circumstances that warrant some leniency, which shows your customers you care about them and are willing to help in times of trouble.
5. Review Marketing & Pricing Strategies
How are your marketing strategies going? Are your efforts producing revenue, or do you find yourself jumping from one tactic to the next, trying to find something that works?
Without a well-researched marketing strategy and effective tactics to back up that strategy, your marketing budget can feel like throwing money into the wind.
When you have a marketing plan that has a solid ROI, you’re doing wonders for your cash flow.
Look into local competitors and see what they are doing that is proving successful. You may find that you need to work with a digital marketer to improve your marketing.
Price as a marketing strategy
Getting the pricing right for your business is a mix of financial strategy and marketing strategy. Look into your pricing structure and that of your competitors. Are you priced too high compared to similar competitors in your area? Are you priced too low?
Pricing yourself too high may cause you to lose business if the market can’t support what you are charging. Additionally, becoming the “low-cost option” can also drive customers away by diminishing the value of your products or services.
6. Know When to Outsource
Knowing when to outsource is vital! You can try to do it all on your own, but if you’re not knowledgeable in that particular area, then you could be spending too much time and that equates to dollars.
Your time is valuable, and everyone has an amount they are worth per hour. If you spend 10-15 hours per month on your finances because you aren’t familiar with the software or how to categorize transactions, then you’re taking yourself away from work that could be producing income.
If you can outsource your bookkeeping and it only takes them 5-7 hours per month to process your finances, then you’ve saved not only your time, but you’ve saved money and your efforts can be better spent somewhere else.
The same goes for marketing. If you’re finding it takes you 2-3 hours to create one blog post, then you’re wasting your time which means you’re wasting your money. Finding a digital marketer who does this for a living and who is quick and efficient is going to save you time and money.
That’s not all
Tips and strategies for increasing your cash flow go beyond what one blog post can cover, but in my experience, these six are the ones that can realize the biggest gains for your business.
If you’ve implemented these strategies, you’ve gone a long way in streamlining your business operations and maximizing your cash flow.
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