As a business, you want to continue to grow year on year and one of the ways you can do this is improving your cash flow.
The basics of making profit
Improving cash flow often goes alongside making profit. Review your overhead costs and your pricing strategy to benefit both.
Check your pricing strategy is still working for you. Are you relying too heavily on introductory pricing to establish new products? If it’s not economical in the long-run you need to look at other options.
Check your product range isn’t too broad so you end up being stock-heavy. Alternatively, could you be benefiting from scaling-up your operations now, to meet future demand and make longer term efficiencies?
Consider leasing equipment, premises and supplies too – for a small business especially, this can give you fixed costs that are spread over time and avoid sudden bills if something needs replacing.
Reducing your overheads wherever possible and getting your pricing strategy right should keep cash moving in the right direction.
Check what you already have
Carry out an inventory of what you already have to see where you have cash tied up that you could utilise. Excess stock – both supplies coming in and products going out- have to be stored and looked after. Make sure you’re not spending money on things you’re not using effectively, for example, storage space or equipment.
If it’s not bringing money in, it’s costing you money in some way. Don’t hang on to items unnecessarily and consider how you could offload them differently even if that means at a reduced cost. (Read our 5 devious ways to spend less on office stationery here).
Avoid late payments
To make sure your own bills are paid on time, you need to avoid late payments from your customers. Firstly, you can make sure you send your invoices out promptly- check that your invoicing process doesn’t cause unnecessary delays.
Secondly, are your payment terms fair or overly generous? Check the terms of the payments you yourself have to make and be consistent with those to prevent too much of a lag-time between your payments coming in and going out.
Make payments easier for your customers
If you’re expecting your customers to jump through hoops to pay you, it will be no surprise if they don’t rush to do it. Simple is the key here, and an online option should be a given. But ‘simple’ and ‘online’ don’t always go hand in hand. Review your online payment processes and make sure the design is clean and the journey is customer-focused.
Direct Debit should be the default for regular customers to make on-time, consistent payments. The payment amounts can be varied and everyone’s admin time will be reduced. Because customers pre-authorise you to take payments from their account, you are in control of the process.
Accounting like a boss
Make sure you understand your cash flow properly using the most up to date data and information. There are lots of online accounting tools and software available and if you’re still using a spreadsheet or a paper filing system, you’re seriously missing out.
Having the ability to check your accounts from anywhere and instantly, will put you ahead of the game. The best systems are integrated, customisable and can even manage automated transactions, so you can manage your finances more effectively without spending your valuable time on mundane processes.
