Cash flow is an integral part of any business, small, large, up and coming or well established. Cash flow is, by definition, the coming and going of cash through your business. Incoming cash is the often the number one goal or business owners as it means that people are in fact purchasing your goods or taking advantage of your services. Outgoing cash, while potentially less desirable, is still an important part of any business. Outgoing cash represents the operating activities of your business, meaning the money it takes to keep your business running and productive on a daily, monthly and yearly basis (is small business debt a serious concern of yours? Learn how to deal with it now).
The flow of cash in and out of a business is unique to that business, and more often than not cash flow is slightly more complex than simply profits minus expenses. But the one thing we’re sure we can agree on is that increasing your business’s cash flow is an extremely desirable accomplishment, here are our top tips on how to increase your cash flow and keep your business running smoothly:
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Communicate With Your Sales Team
If your business sells products then it’s your sales team that can greatly affect how much cash is coming in. Sales associated often understand your customers even more than you do; they are a great asset to your company so make sure you always communicate with them as they can probably provide valuable information on how to increase your sales.
Keep an Eye on Your Payments
If you’re a vendor and the majority of your business comes from selling to other businesses or individuals who typically don’t pay on the spot, you need to keep an eye on when those payments are due. Keeping your cash flow at a steady pace means you need to make sure your customers pay their bills and settle their accounts on time and in full. Set up some sort of reminder system either through the mail or even email, a gentle reminder might be all your clients need to pay their bills on time.
Increase Your Prices
This may not be the best idea for everyone but increasing your prices by a small percentage across the board will lead to a serious increase in your business’s profits. Just make sure you prepare yourself to deal with potential backlash as some customer may not be happy that you’ve increased your prices. You may lose a few customers but you might also find that there is no change or issues concerning your customer base.
Keep in Contact With Previous Customers
While new customers are always great, returning customers mean you’re creating relationships that could last years and be very profitable for your business. Keep track of your customers through a monthly or yearly newsletter. Send out email invites to special sales or other discounts to returning customers.
Shorten Your Payment Periods
If you allow your customers a certain amount of time to pay off their account balances you should consider shortening that time period. Having good cash flow typically means you have a constant stream of cash coming into your business and a very small stream going out. If you have to wait 30 plus days to get paid you may in the future experience cash flow issues. Shortening your payment period by half or even just a week will without a doubt increase your cash flow.
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Try to Clear out the “Bad” Customers
Most business owners will accept any type of customer as more business is always good business. But if you have one or even a few returning customers that refuse to pay off their accounts or are always late and therefore are negatively affecting your cash flow, consider weeding them out. Working with “good” customers who pay their bills on time will allow you to have a better cash flow and keep track of your profits more efficiently.
Use Profitable Marketing
Marketing your business can bring in a lot of new customers but it also costs a lot of money which can decrease your cash flow. Don’t invest too much money or too much time into marketing campaigns that you haven’t tested and analyzed first. Investing in newspaper ads when the majoring of your customer base gets all their news from the internet is potentially a waste of money, but on the other hand, you could create a new customer base. Either way, it’s always best to start out small and then invest in the campaigns that work best for you.
Create a Relationship with Other Businesses
Getting the endorsement of another business in a similar market to you could mean a huge increase in your cash flow. Alternately, you could work with a business that’s located on the same street or in the same building as you. Getting another business to recommend you to their clients is a great way to increase your client list and potentially your profits.
Increasing your cash flow may take some time but if you commit to working at it and follow even one of the above ideas you’ll definitely be on your way to creating a business with great cash flow and could even see an increase in growth and profit.
Looking For Business Financing?
If you’re in the market to increase your cash flow through a loan, Loans Canada can help. We can match you with the best lender for your needs in your area. Fill out an application today!