As business owners, we make sure to do our due diligence in finding ways to improve our company. We know our company is healthy when our cash flow is healthy. Before getting into the more costly solutions for better cash flow, let us make sure you are doing the small things right. Check out our list of 15 business adjustments that can increase your company’s cash flow.
1. Use cash flow projections
Get yourself some good cash flow management software and keep track of it on a week-to-week basis. This will minimize surprises and give you a clearer picture of what to expect in an average week and help you prepare for changes in receivables. These software programs also have useful insight features that help run your business more sufficiently.
2. Segment your suppliers, customers, and receivables
Approaching receivables as a whole should be avoided because there are many moving parts to them. For inventory, you may have too much cash tied up in products that only sell sporadically. That cash might be put to better use if it was put toward your regular selling items. Suppliers can be split into one-off buys versus regular suppliers and segment your customers into key customers and lesser customers.
3. Make cash flow a company-wide priority
Make sure all your employees know that cash flow is a priority. Employees are driven by targets and that includes your salespeople. If you give salespeople a revenue goal, they will do what they can to meet it regardless of whether the invoices for what they’re selling get paid or not. Have a policy where anything that is written off comes out of commissions and salespeople will be more mindful of the customers they deal with to reach their goals. Management teams should be focused on meeting capital objectives.
4. Shop around for the best insurance policy and service rates
Review your insurance policy on an annual basis and renegotiate it. Get quotes from at least three places so you can compare and if your current provider isn’t giving you the best deal, switch providers. Do the same with your other service providers like long-distance phone and internet. Once you mention that you have a better service from another provider, you are more likely to get a price match from your current provider.
5. Work with an accountant
Hiring an accountant may initially seem like an expense, but you should think of it more as an investment. They can analyze your cash flow and suggest adjustments that you may have overlooked and help you anticipate potential cash flow problems. They also help keep your financials in order and the money part is the backbone of the company.
6. Invest in your business
Improving your marketing and improving your employees through training will pay off by making your business better. With effective marketing, your leads will increase. With effective salespeople, those leads turn into customers which help increase cash flow.
7. Minimize the amount you draw from your business for personal use
Of course, you should get paid from the business you run, but if cash flow is tight, look for ways to keep the amount you’re drawing for personal use down. Any unnecessary money taken out of the company is taking away from growth.
8. Hire a collections agency to go after delinquent accounts
Just because an account is way past due doesn’t mean you should give up trying to collect your money. However, it may not be worth the effort and time of your staff to do it. Collection agencies are used to chasing down customers who won’t pay, so you might benefit from their expertise. Some collection agencies will pursue payment at their own expense and just take a fee once they’ve successfully collected while others will purchase the debt from you. You obviously won’t get the full payment from the delinquent account, but getting something is better than getting nothing.
9. Have a bi-monthly pay cycle rather than a bi-weekly pay cycle
Having your pay program on a bi-monthly cycle only requires 24 pay cycles rather than 26 pay cycles like if it were on a bi-weekly cycle. Fewer cycles mean you save money on the administrative costs of collecting, verifying and tabulating payroll information. Save further by utilizing direct deposit for payment rather than checks.
10. Repair old equipment rather than replacing it (when possible)
Modern equipment like vehicles and heavy-duty machinery will usually last a long time if it’s properly cared for. Establish a regular maintenance schedule for equipment, use reconditioned replacement parts and parts from a third-party vendor rather than original manufactured parts. Set up a contract with a local repair facility for maintenance and repairs that cannot be done in-house. Shelling out cash for new equipment when you have a cheaper option to just repair is not sufficient.
11. Be wary of new technology
Every time a new product comes out — particularly electronic gadgets — the advertising boasts a whole bunch of new features to get people excited, including business owners. Think of technology as an investment. If you are not saving money in the long term or making more money from the purchase of new technology, then it is not needed.
12. Delay equipment upgrades
Sometimes new versions of software or hardware come out several times per year and you’ll always be encouraged to upgrade to the latest version. But, the changes between versions are often minuscule and you might not use them anyway. Resist the constant calls to upgrade unless the upgrade is free. It might be worth upgrading, though, if the newer version has more robust security features.
13. See if you can barter products for goods and services
Sometimes a supplier might also be a customer. In those cases, see if you can negotiate a barter between your two companies where each company receives a portion (or all) of their final payment in finished products. Getting goods and services without touching your cash flow is a great situation to be in. Check with your accountant about the requirements of using barter in your tax reporting.
Here are just a few Barter Exchanges Companies you can check out: ITEX.com, NCBarter.com, SuperBizNow.com, U-Exchange.com
14. Reduce staff overtime
Every employee costs more for the same amount of work. Find ways to improve your processes so you can cut down on staff overtime.
15. Make your business more environmentally friendly
A long-term solution, you might be able to save on your water bill by using water saving plumbing fixtures. By installing a solar array, maybe you’ll be able to cut down on your energy bills and even sell power back to the grid. Keep in mind, though, that these are more like investments because they’ll cost more upfront and save you money down the road.
By using a combination of these tactics, most small businesses should be able to increase their cash flow and keep customers, clients, employees, and suppliers happy.