As you know, cash flow is vital for any business to succeed, large or small. As a start-up it is important to properly manage cash flow by increasing cash through higher revenues, lower expenses and active management plans. Here are my top tips for improving business cash flow:
Revenue Enhancements
- Increase sales through through natural add-on services that complement the main service or product offering. For example, a spa might offer its facial clients an eyebrow service as a natural add-on. A rental service may offer rental insurance as a natural add-on and so forth.
- Up-sell customers from basic services or products to premium offerings
- Bill for work as soon as it is completed.
- For multi-phase projects, bill at the end of each phase instead of waiting until project completion.
- Establish reasonable late fees. Time is money and if a customer pays late that is money that you can't use in your business.
Execute Cost Reductions
- Look at each and every expense no matter how small.
- Review supplier expenses and see if you can find the same value for less elsewhere.
- Ask employees for suggestions for expense reductions since they tend to be the closest to the end customer
Actively Manage Inventory
- Do not carry more than 2 months of inventory unless you have a long manufacturing/shipping cycle. Remember, money held in inventory is money you cannot use in your business elsewhere.
- Eliminate slow moving product if you cannot justify the carrying cost of the inventory
- Sell off slow moving product by featuring the items rather than price mark-downs
- Take advantage of bulk discounts when it makes sense
Financing/Credit
- Use credit wisely to further lower inventory costs such as cash back business cards if you are good at managing credit. To learn more check out How to Use Credit Cards to Cut and Manage Expenses.
- Take advantage of early pay discounts when it makes sense
As a part-time CFO service provider, I believe if you implement these tips you will see immediate positive results in your cash flow.
