5 Tips for Enhancing Cash Flow in your Business
Cash is the bloodline of every enterprise. It controls and determines the fall and rise of corporations, whether big or small. According to a survey, 80% of all companies and start-ups in the United States failed due to poor cash flow management. As a business owner/manager, understanding how to manage this cash is an essential trick to saving yourself from bankruptcy.
Managers must learn to balance their positive and negative cash flow to grow and sustain an organisation. Positive cash flow is cash inflow, while negative cash flow is the opposite. When the outflow of money outweighs the inflow, your enterprise is heading toward danger, and drastic measures need to be taken.
One company helping businesses organise their financial accounts and avoid negative cash flow is Upflow. They analyse your customers’ payment database, optimise business account management, and provide recommendations to drive sales.
Here are some tricks you can apply to optimise your company’s cash inflow.
Tricks On Keeping Your Cash Flow Positive
Operating cost is one of the contributors to negative cash flow. It eats up your profit and leaves you with little or no money to grow and expand. When cutting down operating costs, you must look for items and activities your company can survive without.
This might require you to reduce the number of your staff or move to a cheaper complex, whichever you choose to do; know that no business grows without sacrifices. When reducing your cost of operation, it is advisable to start with small things like printing and coffee costs.
Source For Cheaper Supplies
The cost of your supplies will determine how much profit your business can make in the short term. To increase your business cash inflow, you must look for a supplier willing to offer you a lower price for their goods. Some suppliers will even offer you a discount for your upfront payment or a certain quantity of purchase. These cheaper supplies allow you to save more to expand your enterprise.
Offer Incentives For Early Payments
It’s not a hidden fact that customers do not like paying up on time. These late payments from customers can result in your bills piling up with interest, which can lead to negative cash flow. To avoid this, you must develop incentives to encourage early payments and discourage late payments. Some incentives you can introduce include discounts for early payments and a percentage price increase for late payments.
Increasing The Cost Of Commodities
The price increase tip is one of the easiest and most dangerous ways of improving business cash inflow. This method can tremendously double your cash inflow or drastically reduce sales. It’s important that when trying out this method, you approach it with caution. Aside from improving your cash flow, a price increase can also help you understand how much customers value your product, especially if they’re willing to pay the premium price.
Put Your Extra Cash To Work
There is a saying that you need money to make more money. As a business owner looking to be successful, you must be willing to put your money to work so it can work for you.
Putting your money to work means investing your extra cash in low-risk investments like bonds and stocks rather than storing it in a savings account where its value will depreciate due to inflation. Before investing in any commodity or security, it’s advisable to seek the help of a financial expert to mitigate your risks.
Outsourcing specific tasks within your company can prove more cost-effective than hiring permanent staff. When you outsource, you only pay for the time used in carrying out the task, which is cheaper. You also benefit from the vast knowledge and experience of these freelancers carrying out the task, which is a plus for your enterprise.
Hiring staff, on the other hand, means you have to train, equip, and pay workers for every time they work or not.
Applying all these listed tips in your business’s operation will significantly improve your cash flow management technique and help your business survive a challenging economic climate.