Cash flow keeps businesses alive and as much as you should measure your vital signs, you should keep tabs on your cash flow to see how your business is doing. The numbers that show what goes in and what goes out are critical to your success or failure.
If you’ve been winging it all this time and wondering why you’re not maximizing your profit or minimizing your losses, follow these 7 tips to make sure that you stay in the clear.
1. Have a system in place to monitor your cash flow regularly.
Using accounting software, or simply making a spreadsheet that you update regularly makes it easier to see all the data at once. Make sure that you use a cloud service so that you can access this data anywhere and anytime.
2. Minimize the spending you observe.
If you notice that you’re spending more than you need to, find expenses that you can cut out such as utilities, rent or services. For example, if you find that your power bill has gone up, check out which appliances consume the most energy and learn ways to manage it better.
3. Make an inventory and evaluate your assets.
You might have equipment that’s just laying around or has become obsolete and takes up space. If you’re spending money on storage for inventory that becomes stale or products that are no longer in demand, decide whether it’s worth selling those items at a lower price for a small profit. This frees up your storage or cuts out the need for storage altogether.
4. Lease equipment rather than buying it.
There can be arguments on the value for money with leasing versus buying however if your business thrives on having the latest of everything, consider leasing your equipment.
By leasing instead, you don’t need to have a lump sum of cash to either buy it right off the get go or make a downpayment.
5. Get paid faster by switching to mobile payment solutions.
One of the problems with cash flow is that it might take time for your customer to access their funds and transfer the money to your account. There could be a bunch of reasons why the cash would come in later rather than sooner using the old way of transferring money. Using mobile payment solutions that you can set up on your phone, tablet, or computer makes this process more convenient for both you and your customer.
6. When engaging with long-term contracts or bulk orders, ask for deposits or partial payments.
One of the problems of cash flow is making sure that you are able to finance the materials and labor for the finished product. When orders are large or take up a long time, cash flow might be tight or even in the red. When you make sure the customer or client pays a deposit or partial payment that can cover or at least help cover these costs, you can ensure that you’re not disrupting your flow for other projects.
7. Don’t rush to make payments.
There’s no incentive to rush your payments to your vendors, utility expenses, and employees. Figure out how far and late you can push your payment without risking their fees and harming your relationship. There might be situations where you think that you need to pay everything off as soon as possible but that could lead to problems down the line. Making payments has to be done with a schedule to ensure that you’re keeping your cash flow securely active.
Your company depends on your ability to stay on top of your cash flow. Don’t worry about not getting it perfect all the time, instead worry about not doing anything about it at all. Keep these tips in mind and you’ll be able to keep your company running smoothly.
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