Small and medium-sized businesses fight a constant battle to have enough cash flow to meet their financial obligations and invest in those things that will help their smaller businesses turn into large ones.
Because they generally lack sophisticated tools and dedicated departments for money management, there is often money left on the table from their business efforts.
But even with fewer resources available, smaller companies can still generate and collect more revenue consistently. They only need the following roadmap to follow to get the job done.
1. Understand How Cash Flows into Your Company
The first step is to understand how your company generates cash. What are your main sources of income? How do they pay you? Is their payment terms the most beneficial to your company? If not, can the terms be adjusted to be more beneficial? If so, you can generate revenue more quickly and remember time is money.
2. Offer Discounts for Early Payment
Offer your customers discounts on their invoices when they pay them early. This could bring money more quickly into your company.
3. Understand How Money Flows Through Your Company
When you receive payment on an invoice, does the money get moved through your organisations efficiently? Are you paying late or taking additional employee time because of delays within your organisation? If so, remove these, and you have created the equivalent of a new revenue stream. Understanding cash flow is vital from early on.
4. Create a Sensible Expense Budget
Works with your financial person to set an expense budget for your company. Base things on where you need to get costs and see how possible it is. This might take some time but could yield great results.
5. Go On a Cost-Cutting Spree
Look at all of your business expenses and determine which ones can be reduced or eliminated. Put your focus on those fees that are recurring monthly, quarterly or annual expenses. Can you minimise any of them?
Have you reviewed their use recently? Look at your health and other insurance policies, for instance. Can they be adjusted? New and more cost-effective business insurance policies can be cheaper, and offer better coverage for your business. Also closely examine utilities and any subscriptions you have. Can changes in habits cut these bills?
6. Reconfigure Your Sales Department
If sales are a problem for your company, you should shake up your sales department. Consider placing them under a new manager for a short period, or you take over sales to see where the problems are. Sometimes a new face and style can create magic.
7. Increase Online Marketing
Many companies do not realise the power of online marketing today. SEO, social media marketing, email marketing, websites and blogs can be very effective and acquiring new customers and increasing cash flow quickly.
8. Pause Spending in Non-Critical Areas
Is your company engaging in projects that are costly, yet non-critical? If you are in dire need of cash flow you should shelve any non-critical projects until your cash flow improves. This will free up extra cash for you now.
9. Hire Temporary Workers
When you make a new hire, you must train that person which costs money and takes time. You must then assume the costs of their being an employee. Instead consider bringing on completely trained workers from an agency. They can start immediately, and you don’t have to put them on the payroll as a full-time employee.
10. Delay payments to Your Vendors
This is an option of last resort because your vendors are so valuable. But if you must, let them know that you are going through a cash flow crunch and you need to pay them late. Tell them exactly when you can pay them and offer a small interest rate to them if you can afford it. This is not something to do often, but in a desperate situation you might have to go for it.