Improving Your Cash Flow
Monitoring the flow of your cash is critical to the stability of your business. When it is positive, your business is considered successful. If it is consistently negative, your business will not be able to sustain itself without intervention. Cash flow statements provide business owners with an understanding of how cash moves in your business. It is the way you pay salaries to employees and pay debts to vendors.
If you find yourself experiencing a negative cash flow, you need to evaluate the cause and make plans to reverse the situation. Here are some suggestions to improve the influx of cash into your business and stem the flow of cash out of your business.
Request Your Cash
Invoices should be delivered promptly to your customers, preferably at the time the service or product is delivered. Develop a collections program that increases timely payments from your customers. Contact your lender to develop a factoring loan. This type of loan allows you to turn a portion of your invoices over to the lender for them to collect. They keep a portion of the collected amount and give the rest to you. This is a great technique for collecting payments on older invoices that clients have not paid.
Monitor Your Expenses
Work with your staff to monitor, track and decrease your expenses. If your business is seasonal, hold off on larger investments or purchases until you are in a more income-producing season. You can also speak with vendors to make a payment plan for purchases.
Inspire Your Workforce
Inform and train your employees to monitor their expenses to improve the profitability of the company. If your business receives a discount when using a preferred vendor, ensure that your employees understand the importance of using that preferred vendor. If financially possible, consider establishing a quarterly or annual bonus to employees based on the profitability of the company.
Innovate Your Equipment
Take advantage of the investment you have made in your equipment to improve your cash structure. You may be able to refinance equipment loans or real estate loans to take advantage of lower interest rates. You may consider leasing new equipment as opposed to buying it. Leasing usually includes maintenance packages to minimize those expenses.
Maintaining a positive cash flow is a delicate balance of monitoring your incoming cash and managing your outgoing cash. Creativity and management are the keys to structuring your business for success.