For many businesses, lack of revenue really isn’t the core issue harming their business—it is poor management of the cash they are bringing in. A healthy cash flow is necessary for a business to thrive, and it is all too easy to fall into bad habits or operate on auto-pilot, not carefully evaluating if the way you are doing things now is the best or most effective way to promote the financial health of your business.
It is easy to believe we have a good handle on our business when we really don’t. Sure, bills may be getting paid on time and there are no glaring issues, but that does not mean everything is going swimmingly.
If you are having cash flow issues and you haven’t taken a closer look at everything happening in your business on the money front, there are likely a variety of changes that need to be made. Some of them may not even be that big, but lots of little changes can add up.
What are your expenses every month? How much money are you bringing in every month? What is the forecast for the upcoming quarter or year? How is the receipt of invoice payments matching up with due dates of your own invoices and other bills? Is there anything you really don’t need to be paying for right now?
Are there any deals to be made, tweaks to services you are using now or the possibility of better pricing. For example, for your supply chain management, is the transportation solutions provider you are using now offering the most efficient service at the best pricing?
Don’t Spend Money Before You Need To
The idea of paying a bill way before it’s due can give us a nice boost mentally. You get it out of the way and you feel like you are being fiscally responsible. But unless paying a bill early is offering some great advantage, like getting an early payment discount from a vendor whom you use regularly, it is probably better to hold onto that money for more immediate needs, especially if your cash flow is a bit clogged up.
What’s Going on with Your Receivables?
It is amazing how much money businesses are owed because of past due receivables that they just aren’t being aggressive about pursuing, and not aggressive as in ‘mean’ but as in persistent.. Many businesses have absolutely no set system in place for dealing with late payments—collection efforts are random and haphazard…if this sounds like you, that has got to change. You need to develop a system that is applied each and every time.
You also want to consider if you should be more judicious in determining credit limits, especially for new clients, or even extending credit at all until a certain time period has passed. Perhaps you should require partial payment up front and terms for the remainder, depending on the nature of your services.