How to keep a positive cash flow
Whether your business is in its startup or later growth phases, the importance of a positive cash flow remains constant. Think of your company as a town with a river running through it. You can’t afford for the river to run dry. Just as it’s essential to have an effective marketing plan, to generate sales, build your brand and employ the right people, it’s equally as vital to have the cash reserves to cover the never-ending basics of your lease, your utilities, your payroll, and your equipment. Here are the key considerations for maintaining your cash flow.
Be on top of your expenses
If your monthly outgoings are greater, or breaking even, with your business’s income, then you need to reassess. Are all of your expenses essential? Are you still paying for a landline phone when most of your calls are via mobile? Can you cut back on office stationery, or on the number of computer terminals or printers in use? Can you negotiate better terms with your suppliers? Streamlining where possible in each of these areas can have a surprising upswing in strengthening your cash baseline.
Are your products and services realistically priced?
If your pricing is too high it could have a negative impact on sales. Lower, competitive pricing could increase sales with the end result that you have a higher monthly income and therefore a stronger cash flow. If you run promotions discounting your products or services then it’s important to get the numbers right, so that the discounted product is either still generating a profit, or leading to increased ongoing sales from an expanded market.
Increasing sales by adding value
Bundling two or more of your products and services together for an overall discounted price can lead to more sales and revenue. Another way to upsell is to include an extra feature for an added cost that is perceived as great value. For example, if you are selling a product with a 12-month warranty, extending the warranty or adding an insurance element for a small fee. All of the additional amounts generated play a part in bumping up your cash reserves.
Managing your payables and your receivables
Getting the balance right here is a sound method of keeping your cash flow strong. Negotiate with your suppliers for payment due dates of at least 60, and where possible, 90 days. At the same time adhere strictly to a 30-day required payment from customers. This gives you a comfortable leeway between your incomings and outgoings. For more details click here.
Using technology to boost your financial position
It’s imperative to have a cash flow spreadsheet accurate and up-to-date at all times and this is where financial software and your accountant become crucial partners in the running of your company. As part of the software package, include payroll, as well as the use of historical data to project future cash flow. This knowledge gives you the edge in planning and budgeting.
A positive cash flow is critical for all businesses, and especially in the early years where it can be the make or break. At Sydney Accounting, we’ve helped many businesses achieve financial success. Speak to us on 02 9810 3222 or send an email: firstname.lastname@example.org to find out how we can assist you.