Most of the businesses face difficulties when it comes to handling their cash flow. Cash is the lifeblood of any business. To give you a clear idea, cash flow is a measurement of the way that money is moving through a business. Business is all about revenue, profit, and expenditure.
To manage your cash flow – you will have to focus on two goals: control your expenditure and regulate your income. Developing the right strategies for your business cash flow is essential. There are a number of ways to boost your business cash flow. Here we have described some of the strategies:
1. Use your business credit card
You can use a business credit card to pay suppliers and make purchases. Make sure you know credit card’s grace period. Usually, you have up to 21 days after receiving your statement to make payment.
Some credit card offers cash-back features. You can contact your banker to find out the facilities of your credit card. Keep checking credit card statements. Maybe you will be paying for the services you don’t even use. Stop automate renews of those kinds of services.
2. Manage inventory
Inventory management is an effective tool to manage cash flow. Review your inventory regularly. It will reveal the cost and benefits of holding various stock items. You should have the right amounts and types of stock to achieve increased sales. Let go of the old inventory.
You can use effective inventory management software. Through inventory management, you will be able to hold less back and produce accurate cash flow analysis reports. In many companies, product inventory increases but cash flow decreases. Make sure that does not happen with your business.
3. Set up a payment policy
When you set up payment policy, you will be able to speed up the cash coming into your business. Keep your payment terms short and clear. Describe your terms in all invoices.
You can offer a range of payment methods to your customers. For example – small discounts on early payments. Set penalties for late payment. This way customers will start making payments on time. Setting up payment policy will save up your time.
4. Invest in your own business
Investing in your business is a good way to improve your cash flow. You can invest in staff training, boosting your marketing, or any specific skill. When you invest in a skill, you actually improve the ways things are done.
To reduce cost and increase profit, you should definitely invest in your own business. You can invest your time into trying effective workflow methods or alternative processes to make your work quicker and easier.
5. Re-negotiate long-term contracts
You might be having long-term contracts with some service providers and suppliers. When you know that you are going to work with them for the long-term, you can contact them for the cost-effective arrangement.
Most of the companies will appreciate the idea of knowing that you will be long-term customer. This way they will not have to ask every month for renewing services. While re-negotiating your plans – make sure you don’t have any extra or add-on services. You can cancel the services you are not using. It will help you to improve your cash flow.
6. Up-Sell and Cross Sell
To increase your profit and cash flow, you can implement upselling and cross-selling techniques. The good example is of restaurants. Along with the main course they offer side dishes and premium drinks. You can do the same.
For example – you can add related products. It does not require high startup cost. When you offer related products, the customers will be able to grab everything they need at just one time visit. Adding new related products will increase your cash flow potential.
7. Manage good business relationship with your suppliers
You should not underestimate the power of good working relationships. From day one, have good terms with your suppliers. This way you will be able to negotiate for a credit account. Creating stronger supplier relationships take time.
Once you establish rapport with them, you can ask for better prices, minimum order quantities and longer payment terms. This will not happen overnight. You have to put your time and efforts to create a good business relationship.
To avoid cash-flow problems, take a look at your business. Monitor your business and make regular changes. Above-mentioned strategies will help you to speed up your cash flow. Make sure you are allocating your money in the right manner.