“Cash is king” is a famous quote in the business world, and it is not far from the truth. As much as sales are the muscles of a business, cash flow is the bloodline. The growth of a company is greatly affected by the cash flow; without which, the business might stall. In order to build a cash cushion, a business needs to be able to convert sales into cash as soon as possible and increase the rate of cash inflow compared to outflow.
Positive cash flow means a business can run successfully and grow steadily, while negative cash flow is bad news, and detrimental to the growth of business. Develop the right strategies to help maintain healthy cash flow. Manage expenses as much as sales and gain some practical tips to help keep a positive cash flow to get the business on the right track.
Send invoices on time
An invoice is a commercial document that a service provider sends to a customer detailing the transaction details, product/service sold, quantity and the prices for the products. To ensure constant cash flow, ensure you send your invoices on time because you cannot get paid without an invoice.
Stay on top when invoicing your customers; send them out in time so that clients have enough time to process the payments. If the invoicing process is tedious, you can make use of software like Quick Books or Zoho Books to help speed up the process and increase the cash flow. You can also send email reminders to clients to pay on time.
Give incentives to your clients
A lot of times, clients are on the hunt for great deals; take advantage of this fact and offer your clients a discount when they pay their invoices before a specific time. If for instance the invoice is due before 20 days, but you want your clients to pay as soon as they get the invoice, give them a little discount. They are more likely to pay faster, which means you also get your cash on time.
Sell off equipment that you no longer use
If you have equipment around the business premise that is no longer in use, you can turn them into cash by selling them off. Material that has been used for a while has a book value, and it can be sold at that value or less. Consider selling off equipment that is unlikely to be used unless the cost of retaining it is minimal or the proceeds from a sale would be negligible.
Review your prices
If you are looking to improve your cash flow, you can consider increasing the prices for your products and services. To come up with a reviewed price list, you can consider the following questions:
- What are competitors charging?
- Have the equipment or inventory prices increased?
- How much workforce do you require?
- Do your prices compensate the time and energy you put into creating the products?
- Are your prices low? Do they come off as cheap or less valuable?
It would be best if you struck a balance between keeping the prices competitive and also matching up the hard work you put in to provide the product or service. You want to make sales and improve cash flow in your business. Lower prices mean you are selling yourself short as clients may consider you less professional.
Review your prices Hire the right people for the job
What if there are some loopholes in your cash flow that you haven’t caught yet? Well, this is where a professional financial specialist comes in. You need someone who has a keen eye on matters to do with finance to help you close the loop holes and improve your business financial health. You can opt for fractional CFO services to save money on hiring a full -time employee. You will be happy you did!
Additional cost-saving techniques include: depositing employee salaries direct into their bank accounts instead of writing paychecks. You can also establish a regular maintenance program for equipment with a local repair facility to handle complicated repairs or maintenance that is beyond the in-house maintenance crew. Proper maintenance of equipment improves their shelf life so you won't have to buy new stuff every other time.