Not everyone starts a business just for the financial gain. Many choose to become self-employed for lifestyle reasons or to indulge in a lifelong passion. However, a business needs to make money. Without a decent amount of money coming through the company, there’s every chance it’ll fail pretty quickly.
Improving cash flow is the aim of many a struggling business, especially in the current economic climate. By doing so, a business can stand firmly and may even open up opportunities to grow.
Reducing fixed costs
Fixed costs include every outgoing crucial to support the business at its current level of operation. Reducing these costs can be difficult but it will undoubtedly pay off. Look for ways to reduce the amount of rent you’re paying, for example. You can then start to look at lowering any building expenses and the money spent on staff; basically, any expenses which remain the same each month. If done properly, cash should be released for other areas of the business.
Products and supplies
Keep track of your inventory and avoid stockpiling too much, as you may struggle to sell all of it. It’s possible to avoid overstocking by simply selling the products you have before ordering more. This must be done carefully, however, as it’s important that you’re able to keep customers happy – once you lose their trust, it’ll be extremely difficult to regain. Ensure you’re able to strike a balance, perhaps by changing your stock-buying habits gradually.
Another reason to keep on top of your inventory is that buying habits will change. A product may be popular at one stage but consumers are likely to move onto something else pretty promptly. Also, as these habits change, keep on top of your pricing – ensure the prices you charge to fit in with the rest of the industry. Most customers will expect minor price increases every so often, so make the most of this within reason.
When it comes to sourcing supplies, you may find it easier to get everything from one place; you may even be a loyal customer of one particular supplier. However, if this is the case, you’re unlikely to be getting the best deal. Scout out the different options you have and compare prices regularly. It’s even worth speaking to those around you in the industry for recommendations. As with the products you sell, it’s only worth buying in bulk if you’re sure everything will get used in a reasonable time period.
It may seem a little obvious, but the more you sell, the more profit you’ll make and the better off your business will be. Some business owners wonder why they’re not doing so well financially without realizing that many consumers aren’t even aware the company exists.
Technology has opened up a whole new world of opportunities for promotion, and many are extremely cheap or even completely free. Maintaining a Twitter presence, for example, requires minimal time and effort but with the right strategy, it can work wonders to raise the profile of any given business.
Social media sites are basically huge networks of people – meaning word of mouth promotion can spread even further within an extremely short time period. Also with Twitter, and sites like Pinterest and Facebook, business owners are able to keep consumers interested in the products and services they offer. Not every post has to be sales driven either – most should just be published with the intention of maintaining and improving the relationship your business has with its target audience.
The idea of improving your company’s cash flow may seem daunting, but the process is often simpler than you might expect. Providing the right strategies are chosen and executed well, there’s no reason why you can’t improve the fortunes of your business in a quick and efficient manner.
6 tips to improve your cash flow
Long payment terms and deliberately late payment are a brake on the growth of your company. Better cash flow is of great importance to every company. With our experience in effective credit management, you can achieve an improved cash flow with the following 6 tips.
The following six tips help you to collect your claims faster and more efficiently.
1. Start automating
Make it as easy as possible for your customer to pay outstanding invoices. The EPR shows that more than six out of ten companies dedicate late payments to poor administration. To make payments as efficient as possible, the first step is an automation process. Think of a scalable solution that ensures that the entire credit management process is taken care of.
2. Address your customers directly
If your company serves different customer groups, it is likely that they have different payment behavior. Of course, you want to be able to respond to this. Are you active internationally? Then consider a system that supports different languages. In short, ensure complete flexibility. Provide adequate credit management for each client group within the organization, resulting in faster payments, fewer outstanding receivables, and a healthier cash flow.
3. Paying, invoicing, reminding and collecting within one system
It is important that your customers pay the invoice in as few steps as possible. Credit management allows you to combine invoicing, payments and automatic follow-up. Unique is that memories are provided with an integrated payment button that allows your customers to pay the outstanding amount immediately.
4. Real-time insight
Real-time insight into the debtor’s portfolio is important for the cash flow of your company. The credit management system must provide comprehensive reports, giving insight into the latest state of affairs on both invoice and debtor levels. Search functions ensure that all data is available quickly and easily.
5. Set up and administer payment schemes
If your customer does not immediately fulfill his payment obligation, it may be necessary to agree on a payment arrangement. Naturally, you want to record this arrangement in your system. The regulation must then be followed. If the payment arrangement is not fulfilled, the customer must be reminded of the appointment and the payment obligation and be facilitated as well as possible in actually making the payment.
6. Automatic link with a debt collection agency
If an invoice is not settled in the end, you can consider hiring a collection agency. When making your choice, pay attention to a credit management system that has an automatic link with a debt collection agency. This saves you a lot of time and work.