Watching your company’s bank account drop lower and lower while you continue to do more and more work for your clients can certainly be disheartening. However, if you wish to prevent dealing with this issue, you just need to improve your cash flow management. You can accomplish this in the following ways:
Trust No One
Offering generous credit terms may bring in new customers, but if they don’t pay on time, you’re in worse shape than before. If you’re facing cash flow problems, ask potential customers to fill out a credit application. Then check their references.
Another option is to drop store credit entirely and switch to credit cards. This will cost you a percentage, but at least you know you’ll get paid.
Speed Up Receivables
Outdated processes can also hurt cash flow. Cut out the middleman by having customers pay your bank directly. Or get a lockbox, a post office box that your bank can access on your behalf.
You could also consider offering a discount to customers who pay early.
If you have a good relationship with your suppliers, ask for an early-pay discount and more favorable contract terms in exchange for your continued business.
Your suppliers save money knowing they don’t have to check up on you every month. See about getting a slice of those savings.
Analyze Your Pricing
Survey the market and rethink your pricing strategy. Are your products and services too expensive? Too affordable? Either extreme will drive away business.
The right price point will be somewhere in the middle. FInd it and improve cash flow the old-fashioned way – by boosting sales.
Maximize Each Sale
Of course, customer acquisition is always easier said than done. In the meantime, try selling more to your existing customers.
Maximizing each transaction by upselling or cross-selling will widen your profit margins and provide you with useful sales data while also generating needed cash.
Efficient cash flow management is a vital part of running a successful business. By implementing the techniques listed in this article, you can ensure that your company will remain on a solid financial footing for many years to come.