Enjoy a smiling cash flow
Managing the cash flow of the business is one of the most critical tasks you may ever face. Most of the entrepreneurs focus on the production and the service and tend to ignore the value of a healthy cash flow; then reality hits them hard. Below are some basic tips in this regard:
- Keep a record of all expenses: make sure that each and every payment is recorded on your agenda, excel, accounting software or even a mobile ap. The bottom line is to have it recorded with a proof such as a copy of the bill.
- Categorize your expenses into different groups: it is only when you know how much each category is costing you that you can start working on cost reduction.
- Take each group of expenses, compare it to different months and try to come up with solutions to reduce each number, without affecting the quality…For example, don’t reduce the quality of your raw material because it will impact on your reputation.
- Keep selling as the highest priority because it generates continuous cash flow to your business and keeps it alive. More on this topic will be explored in future articles. What you need to understand is that your are the most eligible and passionate person to sell for your business.
- Invoice promptly; otherwise companies won’t have you in their records. Not all companies are well organized and you don’t want to give them the excuse of not paying you on time. Once they have your invoice received, you will have better chances in collecting it.
- Don’t be shy to follow up on your collection. Not all clients will pay you on time. Some of them actually wait for you to remind them. Otherwise, they think you are careless about when to be paid or they might simply forget due to their business schedule. Follow up professionally and nicely.
- Increase your down-payments; it pushes up your cash flow and gets your clients more committed. Clients usually don’t mind paying a bigger down-payment. Their main concern is having their quality work at the right time.
- Ensure a good financial reporting: whether customized software or a well structured Excel for a small business can help you identify your financial weaknesses and make sure to work on fixing them. After all, without good measurement nothing can be improved.
- Have clear terms and conditions. Small businesses are usually scared to impose their system on big clients. Well, big clients are scared to work with weak suppliers. You must know how to position yourself, sell yourself, and be up to the standard.
- Reward clients for quick payments. For those who pay you upfront, give them a special discount, a small gift, a better treatment, etc. Otherwise, they will pay you late and this might lead to a weak cash flow.
- Negotiate better terms with suppliers. After all, you are their client and they must always satisfy you the way you are satisfying your clients. Once you have a bigger volume for the business and a better relationship between the two parties, you will be able to negotiate better terms that keep you in a win-win scenario.
- Always consult with a financial or business expert to help you in this regard; they know what you are going through, they have enough experience and insight on different businesses and can give you an objective feedback to guide you all the way.
What will you do right now to start improving your cash flow?
Jade W. Dagher
Business & Wealth Strategist
Certified Management Consultant ©