The key to keeping cash flowing in your business is easy- all you need is a clear and smart strategy and some good negotiation skills.
When you’re spending on purchases, sales, and everything in between, you can get sidetracked and lose sight of your expenses.
Let us take a look at some tips to improve your business cash flow quickly.
Price Your Products & Services Appropriately
Very often, business owners price their products too low to make them seem more affordable to consumers.
This tactic can hurt profitability and leave you short on cash.
There are “costs” which you should take into account when you decide on a price-
- Production cost of one unit, which includes the prices of raw materials, production process and anything else that goes into producing the finished product.
- Fixed prices covering traditional business expenses like rent, marketing costs, and distribution costs.
- A profit margin of at least 15-20% to help you keep your business running.
If you truly believe your product has an edge over its competitors, especially in terms of quality or technology, don’t be afraid to price it higher!
Create A Business Budget
Money management will ensure you don’t cross a certain financial line.
You should have a budget even before you start putting money into your business.
Keep in mind, a business budget is very different from a personal budget and the former is more complicated and time-consuming to create.
Your business budget will depend on factors like office rent, production costs, employee wages, operational costs and other variable costs.
Apart from this, you will also need to create a contingency fund for emergency purposes only.
Focus On Inventory Management
Poor inventory planning can adversely impact working capital. Effective inventory management will ensure that you don’t overstock or understock – both of which can cause cash flow issues.
Instead of relying on manual tracking, which is more prone to errors, invest in inventory management software.
It will help automate the procedures, and you will have a clear overview of your stock levels at any time and place.
You should also make sure that other parts of the inventory management process, like audits and quality control checks, are happening on time.
Send Your Invoices On Time
You cannot expect the cash to flow in if you don’t collect your payments on time.
New businesses often miss out on sending invoices and following up with customers for payments.
Ideally, you should send the invoice immediately after you provide the service or one to two days after the work is done.
In some cases where heavy investment is required for the work, you can send the invoice in advance.
Include all the transaction details with a complete breakdown of the prices and due date for payment, so the customer has all the information in hand.
Negotiate With Suppliers
Learning how to negotiate with suppliers will not only help you build relationships with them and get better deals.
Don’t stick with just one supplier and spend time going back and forth on prices.
Explore your options, and you might find great discounts or offers with other suppliers.
Your preferred supplier might even agree to match the price or offer you a better deal if you have other suppliers ready at hand.
Conclusion
There will be situations where you will have to find alternatives for things that are too expensive or not in your budget.
This might mean sourcing a different supplier or renting a smaller space.
In the early stages, try saving as much money as you can to sustain your business till it reaches a profitable stage.
