21/04/2021
Top tips for Effective Cash Flow Management
"Clearing out your inventory can really help kick-start healthy cash flow. Try to employ discount sales and planned promotions to move products as fast as possible.”
There are two main strategies that improve your cash flow: increasing the amount of incoming money and reducing the amount of outgoing money. Here are ways you can achieve a healthier financial situation.
• KNOW HOW MUCH YOU NEED TO BREAK EVEN
Before you can work towards a positive cash flow, you need to know how much you need to earn to simply break even. If you go over the break-even point, you’re doing something right. If you fall short of it (consistently), then there’s an issue that needs addressing.
• HAVE AN EMERGENCY CASH RESERVE
In the same way that people should have emergency funds, businesses should always have emergency cash reserves. This allows you some flexibility and security during economic downturns. A good rule of thumb is to have enough to cover at least three to six months’ worth of expenses.
• SET INVOICE TIMELINES AND TERMS
It’s imperative to establish very clear payment terms, in writing, before taking on a new client or supplier. Make sure to lay out when payments for invoices are expected, whether it’s immediately upon invoice or within 15, 30 or 60 days.
• PUT CASH FLOW OVER PROFIT
The secret to success is all about how you manage your cash flows. Always check your earnings against your break-even point. If you’re earning more than that yet money still feels tight, you probably have an issue with your accounts payable, accounts receivable or shortfalls.
• ASSIGN SOMEONE TO MONITOR YOUR CASH FLOW
Keeping track of your cash flow is an important part of owning a business, you need to make sure that you’re always up-to-date with the numbers, especially if you’re going way over or under your break-even point.
• DRIVE SALES WITH INCENTIVES OR PROMOTIONS
Promotions are a great way to boost sales quickly and effectively. You could run a contest, start a customer loyalty and referral program, or drum up publicity through strategic social media posting. Clearing out your inventory can really help kick-start healthy cash flow. Try to employ discount sales and planned promotions to move products as fast as possible.
• REDUCE YOUR EXPENSES
While bringing in more money is always a good cash flow management strategy, cutting down on costs can achieve similar results in a different way. If you have unused equipment, cut down on storage costs (and bring in some extra cash) by renting or leasing out equipment. Find other ways to increase your profit margins—cheaper suppliers and higher prices are both good places to start.
• CLEAR OUT YOUR INVENTORY
Clearing out your inventory can really help kick-start healthy cash flow. Try to employ discount sales and planned promotions to move products as fast as possible.
But one size does not fit all, Chiro is available to sit down with you so that we can come up with solutions that work for your business together.
