Every business, big or small, deals with cash flow issues at some point or another. Perhaps the business planning aspect of starting a business wasn’t as fleshed out as it could be, or credit was extended beyond the businesses’ ability to cover. Whatever the reason, there’s a cash flow problem that needs fixing as soon as possible.
The first step? Isolate the cash flow problem. Then, use one of these suggestions to improve the situation.
Cash Flow 101 – Collect Receivables Quickly
One of the fastest ways to increase cash flow is to ensure that all debts to your company are paid promptly. This means either cash in advance, net 30 days, or cash on delivery. Therefore, look at how customers are paying the business now, and how/if that can be adapted, such as creating a system where the client our receives a two percent discount if they pay net 30 days.
Cash Flow 101 – Discount Prepayments
Many customers, when paying net 30, end up paying more like net 45 or even 60, depending on their budgetary schedules. Therefore many an entrepreneur has devised a system where cash customers receive a cash discount. This way cash flow stays positive, and customers who pay early are rewarded.
Cash Flow 101 – Increase Sales
Its difficult for most entrepreneurs to focus on the sales aspect of a business when their heads are stuck in the backend of making sure everything runs smoothly. Try conducting a needs analysis, send out press releases to the media, or take on some email marketing and customer satisfaction surveys. Even sales calls can increase the bottom line, which will in turn increase cash flow.
Cash Flow 101 – Create Higher Profit Margins
There are only three ways that a business owner can compete: price, quality and service. Choose two and that’s the basis of a marketing plan. Since most entrepreneurs can’t compete on price with the Big Box stores, giving a bit of a cash flow cushion in the form of a higher profit margin just makes sense – as long as quality and service are beyond customer expectations too.
Cash Flow 101 – Stay Positive
If money isn’t flowing, act cautiously about sharing that information with customers, clients, or most importantly, staff. Cash flow issues only create fear and dissent within an organization, so try to stay positive during the process. Doubt spreads, but so do positive thoughts.