In my many years spent working with organisations of all shapes and sizes, I’ve noticed that most businesses focus heavily on their long-term goals.
While this is usually a great thing, it can inadvertently leave your business struggling with short-term cash flow.
Although your business may be turning a sizeable profit on the books, you’re also receiving multiple bills and payable invoices every day. If there’s no available cash on hand when it’s needed most, this can cause a serious problem.
However, it can be managed. Here are some tips to help.
The importance of your short-term cash flow
Cash flow is the lifeblood of your business.
It is determined by the balance of liquid money that is entering and leaving your business at any one time. Ensuring that you maintain a positive cash flow balance, especially in the short term, is crucial for your ability to continue to operate. It’s how you pay your bills, salaries, unforeseen obligations, repayments and more.
If your business doesn’t have enough cash to cover those costs, there may not even be a future for your business to think about!
The Small Business Development Corporation notes that cash flow, while often neglected, is key to the long-term survival of any business. Cash flow allows your business to access working capital during quieter periods, and the state of your cash flow can impact future spending decisions, as well as your business’ direction.
So, when you increase your short-term cash flow, you’re setting your business up for long-term success.
11 tips to improve your short-term cash flow
Now that we’ve established just how important your business’ cash flow is, I’m going to present some of the tips that I share with my clients to help them improve their short-term cash flow strategy and effectively grow their business.
- Calculate your monthly breakeven point
Take note of how much you must earn to pay all of your standard bills, then set your sales targets around this number. Understanding your breakeven point and setting accurate, realistic income goals will help you to cover short-term costs.
- Develop your terms of credit
Having an honest conversation with your customers about their payment terms will often help you create more consistency. For instance, setting it at 14 days rather than 30 days.
- Provide multiple payment options for your customers
Engage third-party financing methods to provide your customers with various payment options that are convenient to them – increasing the likelihood that you’ll get paid on time.
- Streamline your invoicing process
Organise your internal invoicing process to ensure that your money comes in at the right time. Ideally, you should be looking to issue an invoice within 24 hours of completing the work.
- Negotiate better terms with your suppliers
Now that you’ve improved how you get paid, you need to take care of how you pay your bills as well. This can help to ensure your cash inflow and outflow is consistent and running favourably.
- Sell other people’s products/services and take a clip
Maximise your leverage by selling complementary products and services from other providers that your customers may also need. This way, you can provide additional convenience by offering a bundled pack to your customers while you increase your own profits.
- Focus on high-margin products
Identify your products or services with higher margins and direct your marketing towards them to maximise cash inflow.
- Increase your repeat business
In a recent post, I discussed how repeat customers cost your business less money to acquire and are often willing to spend more – so make the most of this and reach out to inactive, past customers.
- Run sales incentives
Use internal incentives to switch your organisation’s focus back to sales to help generate more cash inflow.
- Sell unused assets
At a pinch, you can cover costs by selling equipment that you no longer use. Consider your business’ current priorities before taking this step, however.
- Stop handing out discounts
Here’s a revelation: you can improve your business’ cash flow by putting a stop to discounting and aligning your pricing back to where it should be.
These are only the tip of the iceberg.
Remember, if you’re finding that your business feels consistently strangled due to problems with cash flow, a Business Coach can help you to find the root cause, navigate the issues and find a solution.
I have 50 more bespoke cash flow solutions up my sleeve to help you improve your short-term cash flow so you can fulfil your long-term goals.
Do you need advice on managing your short-term cash flow?
An effective short-term cash flow strategy is key to achieving business success. With this, you can organise your finances, increase your revenue and drive business growth.
Whether you need help assessing your cash flow statements, drawing up a new financial plan or simply improving your existing strategies, I’m always here to help.
As a Business Coach and Mentor, I work with business owners like you to guide you on the path towards achieving your business goals.
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