Many areas of your business can have an effect on how much cash you have available. By controlling your expenses and increasing your profits, you can improve your cash flow.
What is Cash Flow?
Cash flow is the net amount of cash and cash-equivalents being transferred into and out of a business. At the most fundamental level, a company’s ability to create value for shareholders is determined by its ability to generate positive cash flows, or more specifically, maximize long-term free cash flow. Read more on Investopedia about Cash Flow.
Monitor Inventory Levels
Holding too much inventory will tie up cash and increase storage and insurance costs. Practicing good stock control will keep inventory at efficient levels.
An increase in a company’s inventory indicates that the company has purchased more goods than it has sold. Since the purchase of additional inventory requires the use of cash, it means there was an additional outflow of cash. An outflow of cash has a negative or unfavorable effect on the company’s cash balance.
Manage Accounts
Follow up on overdue accounts. To properly manage your cash flow, you must know the negative cash flow affects caused by the time it takes your customers to pay on their accounts. Managing debtors and having good credit policies will keep your cash coming in. You may also be able to negotiate longer payment terms with your suppliers.
If you can get payment from your customers before you pay your suppliers, you will have zero out of pocket. Also Learn, 7 Benefits of Record Keeping for Business.
Review Banking Products
Using the right banking transaction products can have the money in your pocket sooner. Consider a mobile point of sale (PoS) device, or investigate banking services to take payments over the phone or online.
Improve Your Financial Skills
Improving your management and financial skills can help you improve your cash flow. Attend a workshop to improve your business knowledge. You can also seek advice from a professional accountant or financial adviser, who can assess your individual situation.
Increase Income
Review your pricing, use an advertising campaign or improve your customer service to see if you can increase profits. You may also want to consider growing your business.
Read More : 5 Signs to Find If Bottom Line Is Good for Your Business
Boost sales with creative incentives. Creative ways to quickly boost sales might include sponsoring a contest, hosting a customer appreciation event, offering referral incentives, or taking your employees on a publicity tour.
Reduce Overheads
Think about reducing staff overtime and controlling overheads. Make your business more environmentally friendly and you may reduce costs such as power and water bills and minimize wastage. Remember to clearly communicate your policies on these items to your staff.
Maintain Some Cash Reserves
You will have cash shortfalls. Your business’s very survival may depend on how you maneuver through those shortfalls. If you start with some cash in your bank account, it will be easier to focus on cash flow and you won’t stress about the shortfalls.
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