Take the time to examine your pricing and processes to maximize their effectiveness
Cash flow is the net amount of cash, or its equivalent, that is transferred into or out of your company. If you’re running a company, the value you create for your shareholders is directly tied to how well you can generate positive cash-flow after paying your expenses.
Here are 10 ways you can increase the cash flow of your business.
- Review your process: You need to know what each step of your process is, and keep track of how well it’s doing, in order to manage and improve it, and increase your cash flow. Consider whether you need a new accounting program to keep track of your accounts receivable and payable so you know how much is coming in and needs to go out, and when. If you must update your process or system, consider consolidating them to make your regular review easier.
- Be more efficient: Look at everything in your business from how you use utilities and how you determine your workforce. What you need can change over time, and it’s worth checking out how you can do things better or cheaper. This may mean adopting a new, or different technology, rearranging your workflow, or looking for new alternatives to what you’ve always done.
- Reevaluate your operating expenses: Check if you’re paying too much for goods or services you don’t need. Can you cut something out of your monthly budget? Over time, small expenses can add up, so you should review them from time to time to see how necessary they are.
- Reduce Expenses: If your cash flow is tight or you’re worried it might happen too soon, look at your payments to see what you can deduct. Is your rent too high? Consider negotiating the reduction with your landlord, finding another location, or working remotely. Are you reading all your publications? Do you need to belong to all the organizations you do – or can you deduct them and their entitlements? Check your insurance policies. After you’ve already reevaluated your operating expenses, you should have some idea of what you can modify.
- Lease, don’t buy, new equipment: If you need new equipment, technology, or a company vehicle, consider leasing rather than buying it. This way, you can get the latest version without paying a lot of cash and trade it later instead of changing it.
- Check Your Goods: Do you have extra inventory just sitting there? It can be expensive to store, so you should consider making a clearance sale, using a liquidator, or donating it to a charity for a tax receipt. Once you free up that space, you can review whether you still need it.
- Update your payment process: How old is your payment processing? Can you update or streamline this? Consider switching to automated or digital payment systems and developing automated reminders and electronic payments to save your time and money. You may be able to ask customers for initial deposits or split the payment for a larger process into multiple stages, so you get paid at the end of each stage rather than at the end.
- Interacting with or encouraging customers: Are your stable customers paying you every 60 days? Can you encourage them to pay within 30 days? This may mean offering a discount for early payments, but it may be worth it if you can get your money in first. Are your customers paying you monthly? Maybe you can even offer an incentive to convince them to switch to an annual plan, so you can get their money upfront rather than time.
- Consolidate or Renegotiate Business Loans: If you owe money, talk to your lenders and see if you can negotiate a lower rate or extended payment terms, which can help you increase your cash flow. Many institutions have created special programs to help businesses during this pandemic, so that you can benefit from them.
- Check your pricing structure: If your business is not dependent on cash flow invoicing, stagnant, or declining earnings, may be due to out-of-pocket pricing. Are your prices so high that you are losing business to your competitors? Or, are you charging less and need to raise your prices to avoid a drop in your margin? Take the time to review all the factors in your pricing structure and consider how they have changed over time before you overhaul them. You need to consider salary, equipment, fees and competitive prices before resetting them, but also check them regularly.