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Having good cash flow within the business sounds great and seeing it in your bank account is probably even more great right? Wrong. Your cash should never just sit in your bank account without ‘working’ or growing. For you to make more money – you need to let it work for you over time and find ways to grow it.
Running a profitable business with positive cash flow is always good for the sustainability of the business. However, nothing is certain in the world of business and your business can be hit with cash flow problems even if you have recovery systems in place. If your finance, operations and/or investing activities aren’t running efficiently you can still suffer. Which is why it is important to actively work towards growing and maintaining your business’ good cash flow.
The big question now is how? These are the best top 5 strategies that I think are great for improving business’ cash flow and avoid being broke:
Saving your cash flow for rainy days is essential and can come a long way for the business but you must save it the right way. Always choose high-interest saving accounts for your business, and although you may be required to keep the money in the account for longer – the interest might be worth all the wait.
This is the best way to provide your business with liquidity while growing your cash position at the same time.
If you know your initial offer to gain new customers won’t bring in enough money for the business; find ways to create higher price points on back-end products or services.
This can be through offering extra services at a significantly lower price. For example, a restaurant can offer discounted coffee for only the first few hours after opening the store after opening, or maybe an attorney will agree to draft your will for less if she thinks you’re a likely candidate for estate-planning consultations in the future.
You can even go as far as extending your product/service offering that you believe can make the business extra cash and sell it to potential and existing clients.
This all depends on the type of business you’re running. This is where you get financially creative!
With this, you need to be very careful about how you go about implementing it without losing your current customers/clients. Make sure you research your market to make sure you’re not overcharging and driving away customers.
This can extend to requiring deposits or advance payments on larger orders, to ensure you have at least some of your payment upfront at all times. Even when you do decide on increasing prices, make sure it’s reasonable increases that will help grow your cash flow.
Obsolete, and non-working equipment takes up space and ties up capital which might be used more productively somewhere else. Equipment that has been owned for a longer period will usually have a book value equal to its salvage value or even less, so a sale might result in a taxable gain that leads to more cash flow for your business.
This gain should be reported on your tax filings. If you have to sell below the book value, however, you will incur a tax loss, which can have an effect on the cash the business already has.
Selling un-used items is very easy in 2019 with all available online platforms at your disposal. Make use of them.
This has to go without saying but let’s just go ahead and say it anyway:
Are you paying for a lot of goods or services that you simply don’t need? Can you cut some of the line items out of your monthly budget? Over time, small yet unnecessary expenses add up and that gets taken away from your profits and cash flow.
Though it’s easy to forget about or overlook trivial expenses, they can often leave you paying hundreds of Rands, if not more, in unnecessary bills and fees over a year. Take a hard look at your bills and determine where you can make cuts, even if it’s momentarily.
Generating good cash flow is a challenge for any type or size of business. It all comes down to how well are you managing your business’ cash flow. If you’re not getting it right by yourself, then maybe it’s time to consider outsourcing and having a professional help you through the processes.
CVW Accounting and Bookkeeping is your best bet to achieving your financial goals and good cash flow management. Message me directly and I’ll explain the ‘how’ for you!
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