No matter what industry your business is in, cash is important. Having sufficient cash on hand to cover your expenses is essential. To ensure this, you will likely want to improve your cash flow. There are many factors that can impact cash flow, thus there are many ways to enhance it. The following suggestions from Portfolio Management Group that can help almost all businesses.
Get Really Good at Keeping Records
Bookkeeping is an essential part of running any business efficiently. Even if you aren’t a master of finance and accounting, it is a good idea to familiarize yourself with the basics and consider hiring an accountant (even if it is an outside contractor).
Having good records and reconciling your actual income and spending against your projections can help you to catch unplanned expenses or underperforming revenue quickly. Many cash flow problems only become serious issues because they go unnoticed.
Work on Shortening Your Accounts Receivable Collection
The amount of time it takes you to collect on invoices can have a big impact on your cash flow. Working to improve your accounts receivable timeline is a great option. For example, you could offer your customers a discount for paying early. Additionally, you could create a process that ensures you follow up to collect prompt payment. Sometimes slow-paying customers only take their time because they are busy with other matters.
Cut Unnecessary Expenses
Just like you may tighten your personal budget to save extra money, you can do the same for your business. Some common unnecessary expenses include excessive food and travel costs, inefficient equipment, unnecessary business software, and bank fees due to poor money management.
You may be surprised by how much cash you can make available simply by being more diligent with your expenses. An expense tracking app may help you to stay on top of it all.
Another common expense is your taxes. You may be spending too much, particularly if you have your business organized as the wrong type of entity. Consider switching to a limited liability company to enjoy the tax benefits of a partnership with extra liability protection.
Don’t Leave Supplies or Money Sitting Around
Make sure your assets are working for you. You should make sure your cash is earning money by either putting it in a high-yield savings account or even actively investing it. Similarly, you don’t want to have supplies and other assets sitting around your business. Consider adopting a leaner model (such as just-in-time inventory) to help you cut costs. Remember, inventory is dollars sitting on the shelf!
Invest in Cybersecurity
A cyberattack can easily snuff out a small business in the blink of an eye. And with cybercriminals continuing to target small businesses, it’s not a matter of if anymore, it’s a matter of when you’ll be hit. An attack on your business could have a significant impact on your cash flow, not to mention your reputation. To ensure your business can manage a cyberattack, it’s absolutely critical to have a plan in place, and to work with dedicated cyber threat services. An IT security team can help ensure software is up to date, check on necessary patches, deploy the ideal protections, run regular tests, regularly back up your information and secure your IT infrastructure.
Use Debt Wisely
Some business owners are very hesitant to use debt or leases because they don’t want to be making monthly payments. However, this may be a mistake. The right financial products can help you to spread out costs and maximize your cash flow. For example, a line of credit can help to give you an extra cushion for your expenses. Similarly, leasing equipment can help you avoid major upfront expenses and eliminate the risk of owning obsolete, valueless equipment.
Start Improving Your Cash Flow Today
Discover more about improving your cash flow today. With the above tips and a few other strategies, you could ensure that your business is a lean and efficient machine.
If you’re struggling with cash flow, contact Portfolio Management Group today for a no-cost, no-obligation consultation. We will analyze your cash flow and build a custom plan to improve your cash position.