DRIVE CASH FLOW: How to Improve Cash Flow in Your BusinessMay 14, 2018
The ultimate goal of Qorval is to provide your business with the solutions it needs to grow and drive profitability. An important element of profitability is cash flow management. You can have a profitable business, but negative cash flow. However, the relationship between the two is important. A healthy cash flow helps you smooth out your financial ups and downs, whereas unstable management of cash flow could derail your company’s ability to maintain profits, creating “cash droughts” times of during key operating intensity.
Focusing on better cash flow management is a great starting point in turning your business around. If you want to improve cash flow, think about the following strategies to make changes that will have an impact on your bottom line.
Create a Cash Flow Forecast
The best way to start improving your cash flow management is with a forecast. This allows you to get an idea of where you cash flow currently is and where it’s likely to go in the future. A problem small to medium-sized businesses often face is not being prepared for the costs associated with growth – like more employees or bigger inventories. Take the time to map out what the next 13 weeks, and, 12 months will look like for your cash flow, so you have an idea of where things are headed, and you can plan accordingly.
Creative Incentives and Penalties for Payment
The process of invoicing can be difficult, and its late payers can have a serious impact on your cash flow. A good way to keep clients accountable and save time is to implement an incentive and penalty program for payments. For instance, discounts should be applied to any account paid early, and interested can be added to any invoice not paid after a specified date. This will encourage your clients to get payment to you early, improving your cash flow. Additionally, having payment early will save you time and resources in having to follow up, along with extra interest from late payers, so it will save you money in the long run.
Evaluate Your Inventory and Assets
Do an inventory check – goods that aren’t moving off the shelves tie up a lot of cash. Even if you need to sell it at a discount, getting rid of inventory will help you see an improvement in cash flow. Also, take a look at any assets or equipment in your office. Do you have supplies that you never use anymore that are just taking up space? Selling old equipment or even getting rid of or replacing obsolete items will not only boost cash flow but increase efficiency.
Make it A Priority
If improving cash flow is a priority to you as a business owner, make it a companywide priority that all employees understand. Standards should be set from the top down, and targets should be set for employees if their tasks are related the cash flow. Cash flow management is not a black and white process, it is affected by a lot of different moving parts – so everyone should be thinking about how their role in the company affects it.
Work with a Business Consulting Firm That Can Help Your Grow & Profit
Working to improve cash flow can be a daunting process, especially if you’re not experienced in this discipline. At Qorval, our business consulting team has a wealth of expertise, and will bring you solutions to help your company grow and return to profitability. If your company needs help, contact us today.