Tips to Manage and Increase Cash Flow in Your Business
There is an easy way to increase cash flow in your business; borrow more money! More money equals more cash flow, right?
Instead, let’s look at some ideas to help you increase cash flow in your business that won’t increase your debt.
How to manage current cash flow and increase cash reserves
1. Tweak your pricing
When cash flow is stagnant, it’s time to review your pricing. Pricing reviews should be conducted every 6-12 months to keep up with inflation, trends and industry developments, and your experience.
Raising prices = same output + higher revenue.
It can be a fine line to walk when you are just picking a price to charge above your minimum costs. If you price yourself too low, you run the risk of customers not taking you seriously or respecting that you can deliver quality. If you price yourself too high, then you might price yourself out of the ballpark and not attract business at all.
In determining your pricing, look at your own experience and overheads, and consider the perception you would like your brand to maintain. It can also help to do some market research on what other equivalent businesses are charging to create a benchmark for your business.
2. Cut costs
Another way to increase cash flow is to see where you can reduce your costs or streamline processes to make better use of your time and money.
Less outgoing costs = More retained revenue.
You might be able to source your products or materials more economically or find a cheaper way to store them. You could cut costs on postage, or reduce the amount of time you spend communicating by automating some of your internal and external notification systems.
You could outsource some of your production steps, or business administration, to allow you to focus on building the business or closing more sales.
3. Replace old equipment and software
Any old equipment or software could be upgraded to something that works faster, using less power, breaking down less often, costs less to run etc.
The initial spend may be high, but the time and monetary gains will be realised in the long term.
4. Refresh your inventory
Refreshing your inventory every six months or so can increase cash flow quickly and also brings the following benefits to your business:
- If you have stock that isn’t moving, selling it cheaply or even below cost is better than having it just take up room in your storeroom;
- Getting in new stock can refresh your store and awaken your clients’ interest, even attracting new customers.
Host A Sale + Release Something New = Cash Influx!
5. Negotiate long-term contracts
It is easier to encourage repeat business from an existing customer than it is to convince a new person to buy from you.
Long-Term Clients = Consistent Cash Flow
When you have worked with a client once or twice and impressed them with your knowledge, product or delivery, it is completely reasonable to negotiate a long-term contract. This move from project-to-project to retainer style contract greatly improves your monthly cash flow.
Long-term contracts do not need to remain at the same price forevermore, so don’t think you’re locking yourself into one price forever. Your prices should increase annually to fit in with inflation.
6. Improve your marketing
Many business owners get caught up in the daily running of the business and don’t have time left over to work on marketing. Creating a strategic marketing campaign, or improving the one you already have, is key to increasing cash flow.
Through more engagement and awareness you reach more clients, nurture existing clients, and convert more sales.
Marketing + Customers = Sales
The majority of digital customers will not buy on the basis of one contact or sales pitch – they need seven or more visits to your site or views of social media posts to get to enough information about your offer and brand to convert.
Marketing today requires building a relationship of trust with your customers which takes consistent effort. Is your current strategy is working for your bottom line?
Consistent marketing = consistent cash flow.
7. Create incentives for early payments (and penalties for late ones)
If getting customers isn’t the crux of your cash flow problem, but getting the current ones to pay up is, you might consider implementing a system of incentives for early payments. Not only does this manage your cash flow, but it can also free up the time you normally spend chasing payments! Win-win!
You could also implement a system with penalties for late payments, such as interest added, or an administrative cost to cover your time regularly chasing payments.
Save Time + Get Paid = Cash Flow
8. Investigate sources of passive income
Passive income sources are the holy grail of revenue raisers and consistent cash flow. This includes products or content that you only need to create once but can be sold multiple times, literally making money while you sleep. This can include eBooks, courses, software, apps, training videos and more.
If you have any kind of skill or knowledge base that people might like to learn or follow, it is worth investigating passive income.
Passive income sources are usually digital for the reason that they can be produced repeatedly with a minimum of fuss and you can sell them through your own website or a marketplace like Amazon or Teachable.
They obviously take time to create in the beginning which you are not being paid for, which may be why most businesses don’t look into them. But if you can schedule this time aside you could reap the benefits over and over.
Passive Product = Revenue Booster
The hardest part about increasing cash flow is to put aside the time to make the changes we’ve discussed above. While I understand that few businesses may have that spare time up their sleeve, scheduling it in deliberately could be well worth your while to kickstart revenue flow again.
Make the time to get your cash flowing nicely into your business.
Profit First can benefit the growth of your business from DAY ONE!
Subscribe to my newsletter and get my free Beginner's Guide to Profit First ebook.