Cashflow Is The Lifeblood Of Your Business
If someone sewed your mouth shut and plugged both your nostrils–rendering you unable to breathe–you would die within minutes. After all, the human body requires oxygen to survive. A lack of cash flow can prove equally lethal to your business, making you unable to pay your bills, purchase stock, and keep your company afloat.
In order to maintain a steady supply of oxygen, your brainstem ensures that you continually take in air even while engaging in other activities like eating and talking. It ensures that you never forget to breathe. Maintaining a healthy cash flow requires more effort on your part, but by following some proven tricks of the trade, you can ensure that your company never finds itself cash-strapped.
Monitor Your Spending
If you’ve ever tried to hold your breath until you turn blue in the face, your attempts have likely been foiled by your survival instincts. Quite simply put, once your body realizes it’s being deprived of air, it forces you to breathe.
Likewise, by putting checks and balances in place, you can monitor your company’s cash flow and take immediate action when the amount going out surpasses what’s coming in.
An important first step is to closely examine your fixed expenses and identify ways to cut costs. Inc.‘s “5 Tips for Forecasting and Maintaining Cash Flow” states that switching employee health insurance providers or moving offices if your location isn’t critical to business could represent substantial savings–money that could be used to cover variable costs or put back into the business as profit. You may also wish to consider opting for part-time employees as opposed to salaried ones, taking advantage of creditor 30-day payment terms, and renegotiating equipment leases.
Monitor Your Receivables
The whole point of offering a product or service is getting paid for it. It seems forehead-smackingly obvious, doesn’t it? The truth is that many companies are owed substantial amounts of money for services that have already been rendered.
In order to ensure that your receivables quickly transform into accounts paid, you will need to ensure that invoices are sent out right away. According to Entrepreneur‘s “5 Tips to Keep Cash Flow Strong,” invoices should be delivered within 24 hours of the transaction, reminders should be sent before the payment-due date, and discounts should be offered to buyers who pay their bill within 10 days. And, don’t forget to make it easy for your customers to remit payments quickly by offering online options.
Monitor Your Technology
Optimal oxygen intake can only take place when your sinuses are clear, lungs are healthy, and allergens and other irritants are kept to a minimum. In other words, the equipment needs to be in tip top shape.
The same can be said for maintaining a healthy cash flow. Accounting software can greatly enhance your company’s ability to have a clear image of its financial status in real time, enabling you to make adjustments immediately. It can also provide you with access to information from multiple devices anywhere in the globe.
It is also important that your accounting department is well-versed on how to best use these technologies. “Avoiding a Hospital Cash Flow Crisis” states that the adequate training of all personnel involved in accounts receivable and accurate coding and billing is an area that requires attention in order to nurture a healthy cash flow.
Monitor Your Special Offers
Offering “door crasher” deals is a great way to increase the traffic to your store, but loss leaders only work if your customer is encouraged to buy other regular priced items. Make sure that you locate the product in an ideal location and use visual merchandising that will encourage add-ons.
Furthermore, you can drastically increase cash flow by offering pre-sales on “soon to be released” products.
By following a few easy steps and keeping a vigilant eye on your company’s financial situation, you can ensure that the cash keeps flowing at a healthy rate. And, as for your oxygen supply, beware of anyone who approaches you with a needle, thread, and nose plugs.
Are you a budding entrepreneur who is struggling to find a balance between your personal and professional life? You will want to take a gander at “How to Build a Business While Building Your Family.”
About Author: Kimberley Laws is a freelance writer and avid blogger who can inhale her own nostrils shut. You can follow her at The Embiggens Project, Facebook, Pinterest, and Google+.