Many companies go bankrupt, not because they’re unprofitable, but because they didn’t have enough business cash flow to sustain the company going forward.
In today’s 2 Minute Accountant episode, I’m going to help you make sure your business is one of the successful ones.
Cash is king! We’ve all heard that a million times. Cash flow is what keeps your business afloat in the ocean full of other business out there.
Tip: The cash flow helps you continue moving your business forward. It keeps your business alive.
[ctt template=”7″ link=”Yeah2″ via=”no” ]The cash flow helps you continue moving your business forward. It keeps your business alive.[/ctt]
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4 Ways to increase your business cash flow:
1. Put cash in
If you have a cash flow issue the solution is putting cash into the business.
It’s easy to do so if your business is successful.
But what if you don’t have the cash or you’re not able to borrow it?
What if you don’t have the cash to put into the business?
When you give accounts to people, you give them invoices and you pay other people 30 days, right?
Tip: If you can reduce the number of debtors you have in the system, then you have the ability to get cash back into the business.
You might also be interested in: What Is A Balance Sheet?
2. Have a good policy
The best policy for your business would be getting paid cash on delivery, as soon as you do the deal.
You can have a credit card facility so people can easily use a credit card. Have a good policy where you chase people up regularly, put it down in writing and make sure it’s followed 100%.
This could look like:
- After 30 days they get a copy of the invoice
- After 45 days they get a phone call follow up
- After 50 days they get an email referring to that phone call last week
- After 60 days they get a letter of demand
- After 70 days they get a letter of demand from an external person
Establish predictability in terms of the way you go about trying to get the money into your business.
3. Sell your stock
Another thing you can do to increase your business cash flow is to have a stock.
The more stock you have sitting on your shelves, the more you can get rid of it so more cash comes in. Remember, you paid good money for that stock.
So get your product out! Maybe organise a big sale.
Here’s an idea:
Let’s say you have a product you make $10 on and you have another product you make nothing on and it’s sitting on your shelves. To get cash in the door, lose $1 on your product and make 9 bucks on it do you get some cash back. Keep your business afloat!
4. Negotiate with your suppliers
Negotiate with your suppliers in order to get better terms on your contracts.
Tip: Make sure you have a good relationship with your suppliers because even when your business cash flow is low, you might be able to rely on those suppliers to help you through the process.
Remember, if they’re a massive supplier, you’re just as important to them as they are to you!
Here’s a good rule of thumb for your business: pay your bills on time. When you do that, the world goes round, everybody’s happy and everybody survives.
In a nutshell …
- make sure your business is worth putting money into
- try to reduce your debtors to get money back in your door
- get rid of some stock if it’s just lying around
- try to get people to pay upfront and create a system for it
- make sure you have a good relationship with your suppliers
Keep your business cash flow strong!
Cash flow can make or break your business. It’s essential to find efficient ways to manage your business cash flow properly. I can help you create a personalised plan to keep your cash flow strong so your business keeps growing.
Whether you have questions about your taxes, a company set up, business structure or registration, I am here to help you. Let’s get in touch now.
