One of the biggest challenges for business during volatile times is to maintain and increase cash flow.
The top principle in increasing your business’ cash flow is to ensure that you speed up the inflow of cash while slowing down the outflow.
During these interesting times, it is important to ensure that you are focusing on systems and speed.
These two factors are key.
As we know, when a business generates enough cash inflow, it should be able to meet its everyday business requirements and reduce the need to take on any debt. Having a good picture of the state of the business is essential in order to ensure it is able to meet its obligations while also achieving profit. This also provides a critical buffer during challenging times.
There are several ways businesses can maintain and increase cash flow:
- Offer better payment terms.
A simple way to make sure that the money comes in faster is to offer your customers better payment terms. This encourages them to make prompt or even early payments. While offering flexible payment terms can keep your customers happy, this can lead to financial problems on your side. By implementing a better payment plan, you’re more likely to get the money in the bank faster.
- Negotiate longer payment terms with suppliers.
Be reasonable in what you ask, but you can often negotiate a longer payment term with suppliers by aiming for the higher end of what you need. Most often, longer payment terms can be negotiated if you are on good terms with your suppliers, so it’s important to build good business relationships with them.
- Shortening the sales cycle can also prove beneficial.
Aim to send out invoices as soon as possible after a quote is accepted or a job is completed. Also build in progressive payments where necessary – By doing so, you are more likely to avoid disputes overpayments. There is no reason why there should be a delay before sending out your invoice.”
- Periodic payment plans can also help
Having a recurring payment feature “means that you won’t need to chase after your clients”. Many businesses now set up these sorts of payment schemes to reduce admin time and to get paid faster. If you are a service-based business such as a fitness centre or a cleaning company that bills weekly, fortnightly or monthly, payment plans of this nature really work in your favour.,
- Finally, it’s important to review your products and their prices regularly.
It is a good idea to review the prices of your products every six to nine months. Your costs, competitors’ pricing and the demands of your target market change over time. By reviewing your prices regularly, you are equipping yourself with up-to-date information and you can make the decision whether you need to change your prices.
How long has it been since you had a good long look at your product, service and pricing structure? Maybe you need a fresh set of eyes to help with the process?
Talk to the team at DFK Everalls today, we have several ways that we can help you navigate this process more strongly.