“Cash is King” – 8.5 ways to Effectively Increase Cash Flow

 

Have you ever thought about how you will be paying your company’s bills when there is no cash flow?  If you have, you already know that there is no easy answer to that question. Here are 8.5 ways to help effectively increase cash flow at anytime. 

 

Cash flow is the key to positive finances and when businesses are prospering, owners’ often-times overlook being penny-wise; however, managing yourself, your employees, and your company ensures good fortunes and finances. Any company’s goal is to consistently generate and increase positive cash flow. 

 

What is cash flow and how can it be measured? 

As used in the business world, quoting an old friend, Cash is King. The secret formula for great cash flow is:

 

CASH IN – CASH OUT = CASH FLOW

 

Owners need to calculate cash flow monthly and project it at least 12 months out, thereby avoiding the pitfalls of running out of cash.

 

Understanding your cash flow and why managing it is so important.  

Poor and inconsistent financial management is one factor why most small businesses fail.  A positive cash flow is vital for a company’s survival.  And, how you manage your money is equally important.  In fact, a number of small privately held companies close their doors because they lacked inadequate working capital, management skills to increase cash flow, and the ability to produce a profit. 

 

8.5 Ways to Effectively Increase Cash Flow

Companies that have effective management utilize the following methods to increase cash flow.

 

1.        Organized Recordkeeping

Maintaining complete and accurate financial records ensures that a company operates efficiently and effectively. With well kept records and financial data, you are able to easily recognize all business expenses, and track income.

 

2.        Collect Money and Fees Upfront

A business’ main goal is to bring cash as quickly as possible into the company.  Depending on your industry, collect the full amount or require half up front and the remaining balance upon delivery, secure money and fees in advance from patrons once the order has been made and the agreement is signed. 

 

3.        Collect Accounts Receivable

Ensure that your company receives payments promptly and continue to follow up aggressively on open accounts.  Keep in mind the longer the account has a balance the less likely your business will be paid in full. 

 

4.        Audit All Expenses Yearly

It is necessary for business owners to occasionally update and re-audit their expenses yearly. Consider reviewing all fixed expenses, such as: insurance, worker compensation cases, and all forms of communication, rentals, equipment leases, and other fixed costs.

 

5.        Extend Supplier and Vendor Debts

It is important that a business extend and draw out its open accounts with suppliers and vendors.  Keep in mind it is important to maintain good relationships with merchants in order to stretch out the time frame in which you pay your company’s debts.  If prolonging the date isn’t an option consider working out a lower monthly minimum payment plan. 

 

6.        Examine Employees and Make Personal Cut Backs

This will be a tough one but you need to do it. Step back and examine your entire workforce. Balance any cutbacks with your customer service requirement. If your service will suffer because of cutbacks, find other ways to cut cost. This should be your last option. Find ways of making your people more efficient instead.

 

7.        Review Capital Assets

Another way to assist in increasing cash flow is to do a complete and thorough review of your capital assets.  First, examine the company’s unused and inoperable machinery and equipment.  If you own older pieces that no longer operate don’t let the items sit and take up valuable space, sell them and generate extra revenue to reinvest into working capital equipment.   

 

8.        Decrease Non-necessary Spending

One key element to be frugal is do not purchase items you simply do not need. Limiting the number of credit card holders and lowering credit limit will help with spending money you don’t need to. 

 

8.5     Inventory Management and Transportation Costs

Having an overly stocked warehouse reduces your company’s cash flow. Also, consider buying office supplies in bulk from warehouse companies or purchase items online. In addition, keep and inventory count and supply tracking chart this helps monitor spending. Be aware of your shipping costs. Reduce and reconfigure freight rates.  Shop around and send items in bulk versus individual units.  Instead of sending important documents via the postal service or other carriers try faxing or e-mailing because these methods are not nearly as costly.

 

Every small business owner knows that cash flow is a vital element in any successful business.  To be a great entrepreneur one must understand the basics of day to day business operations.  With the 8 above tip to increase cash flow, any business owner will be on their way to making clean profits when applied appropriately.  Be sure to test and measure what ways help increase cash flow in your business.  To find out how the BUSINESS HOUSE, inc. can help you, please call (770) 534-6630, e-mail our office at bizzhouse@aol.com or visit our website at www.thebusinesshouseinc.com.