How can you resolve the cash flow problems of your business?
Cash flow is a common problem for many businesses and can be a stressful experience. When your business spends more money than it earns, it is heading for disaster. However, there are ways in which you can rectify this situation and ensure your business is once again profitable.
Reduce stock
Sometimes businesses order stock in large quantities to gain discounts. They may also want to ensure that they do not run out of stock when it is crucially required. While these are good incentives to order a lot of stock, this can also create cash-flow problems. You can free up cash by providing incentives, such as discounts, so that customers will be encouraged to buy goods for sale. You can also contact suppliers and reduce the quantity of your orders to ensure that you only buy a limited amount of essential stock that you can reorder once it has actually sold.
Review expenses
It is often tempting to buy the latest gadgets for your office, but is it really necessary? Do you have an expensive business broadband tariff that could be reduced by changing provider? Assess if there are non-essential costs in your business’ expenses and get rid of them. You may be able to save money by sourcing cheaper printer ink. You could sell a broken laptop for spare parts on a selling site. Sometimes, reviewing expenses may result in hard decisions such as reducing the working hours of your staff, which may only be a temporary measure. However, until the business is profitable, it is vital that costs are cut to ensure that your business is sustainable long-term.
Negotiate for more flexible deals
It is crucial to keep good relationships with both suppliers and lenders. If you are loyal to a particular supplier and have gotten to know them, it might be possible to negotiate a deal. You could ask if it is possible to make the terms more flexible or to pay in several instalments. If you are honest and realistic about what you can afford, you will be considered more credible and trustworthy. This same ethos should be applied when conversing with bank managers and credit lenders. Inform them of any unanticipated changes to your forecast, which will guarantee that they will be more willing to help you.
Ensure that payments are up to date
It is vital that you send invoices quickly after a service has been completed or a product has been delivered. This reflects that you are assertive when being paid what you are owed. If a customer has an overdue bill, it is important that you get in touch with them as soon as possible to request their payment. This behaviour will show that you are a credible business person and you will gain more respect from clients in the long term. It may also be worth revising the credit period that you offer to customers. This prevents long delays in payment and keeps their financial obligation to you at the forefront of their minds.
Increase staff productivity
It is best to be transparent with staff when trying to increase their productivity. They will want to know why you require them to achieve more work in the time set without any reward. If they know that your business is suffering cash flow problems and their job is possibly on the line, they will appreciate your honesty and have a massive incentive to increase their output. It is important to keep an upbeat attitude and to praise them so that they feel appreciated. Also, try to encourage them by reminding them that they are part of a team so that there is a sense of shared responsibility for the business to succeed.
Outsource work
It might be more cost effective to outsource work to meet deadlines, and avoid any penalties. There are many places where you can find willing workers who command a fair wage and have a flexible schedule, for example, online sites such as fivesquid, upwork, guru, etc. Outsourcing work is a valuable method when you cannot afford extra staff, but need to offload work to free you up for other things.
Foresee problems and remedy them
An invaluable method to resolve problems is to keep a cash flow forecast. This enables you to set targets and monitor finances over the next six to twelve months. A typical way to achieve this is by updating a spreadsheet showing monthly income and expenses to ensure that you are staying on track. Anticipate any periods that your expenses are likely to increase such as higher heating bills in the winter. Remember to be realistic about your projected expenses and to list every expense to provide an accurate forecast.
Remain vigilant when experiencing cash flow problems and tackle them head on. It is surprising how the fortunes of your business can be reversed by pragmatic thinking, sensible cost-cutting and a professional and honest approach to staff, customers and suppliers.