3 Simple steps to improve your cash flow
Many business owners put ‘cash flow’ (or lack of) down as one of their biggest challenges. And often they think the solution is to ‘get more customers’. Well, maybe.
You see, it depends on what the cash flow problem is. Let’s run through a couple of examples.
1. You’re simply not selling enough of your product or service so that your sales income is less than your business costs to run. Must need more customers then! Hmmm, maybe not. It may be that you are simply not charging enough. Getting the right price means having an effective way of setting your prices. Not just the same as (or worse, cheaper than) your competitors. But a methodology that helps you calculate the right price for your product or service that accurately builds in the cost of your time as well as the materials you use AND the time you take in preparing quotes, providing samples etc. In fact charging the right price may mean you need fewer (yes, fewer) customers. When did you last seriously analyse your cost base and pricing structure?
2. Your customers take a long time to pay. Now here’s the conundrum. Your business is profitable but you never seem to have enough cash in the bank. (By the way, the tax man will apply tax rates to the ‘profit’ figure, not the amount of cash you do or don’t have). Simply getting more customers will actually make the problem worse – you end up being owed more! The solution again is quite straightforward and all that’s required is a credit control system that is right for your business. A system that the customer finds easy to follow and that ensures the cash flows into your bank account quickly.
3. You are paying your bills too quickly. Do you get the best terms available from your suppliers? Of course, you want a great relationship with your suppliers and the foundation of a good relationship is communication. Talk to them about your plans and ask how they can best help you. It’s as easy as that!
Of course, there are loads of other ways to improve your cash flow. We have dozens of cash flow improvement strategies which we use to help business owners sleep easier, knowing that lack of cash is no longer the problem it once was.
Ultimately a business owner who sleeps well is all the better for it!