A successful company maintains positive cash flow. As a business owner, it is essential for you to have a solid relationship with suppliers, creditors, employees, and customers. It is key for a small business to have adequate cash available so that things run smoothly and so that you have resources to support growth.
There are several ways to accomplish this so let’s consider it in two parts. In Part 1, we will focus on rethinking and readjusting your strategy in specific, financially beneficial ways. In Part 2, we will explore how a more proactive approach to planning and prioritizing your business goals can save you money.
Part 1: Rethink Your Strategy by Reducing and Renegotiating
Reduce the Payment Terms for Receivables. It is impossible to maintain positive cash flow when customers are not paying in a timely manner. By minimizing a company’s collection periods, more cash may become available for investments. It also brings more liquidity to a small business.
Reduce Needless Expenses. It is crucial for you to examine your business’s expenditures and determine what areas can be cut. You must eliminate items that are not necessary. For example, if your staff uses printed business cards, it may be better to go digital and rely on social media. Also, if your office has tons of equipment that is rarely used, it is smart to get rid of the devices. Eventually, they will become obsolete and worthless. If there are unnecessary services that are draining your money, it is wise to eliminate them as well.
Negotiate Better Terms with Suppliers. One of the top ways to increase a company’s cash flow is negotiating better terms with suppliers. Receiving an extension is similar to having a short-term loan. To begin the process, it is vital to have good communication with your vendors. It is helpful to make a proposition that benefits both you and your suppliers. By being reasonable and discussing your terms with vendor management, you should be able to successfully arrange something better.
Renegotiate Everyday Bills. As your company grows, so do the bills. It is important to assess your business’s current loans and monthly bills, including automobiles, phones, office equipment, and similar items, and to negotiate better contract terms. In the end, these little savings are sure to add up to a significant difference.
Review Customers. When you want to increase your cash flow, you must take a close look at your customer list and identify slow-paying and low-margin consumers. These people can be a major drain on you finances. To receive a better return, it is vital to uncover whether or not your staff is dragging its feet when it comes to sending invoices or pursuing payments. It may be wise to let go of certain clients or to renegotiate terms.
Improving your small business’s cash flow is essential. If you would like to learn more about how a chief financial officer can help, please fill out my online form or contact me at 901-277-6165 to set up a meeting.