Managing the finances in your business can sometimes be a bit of a headache. Your business can be thriving but you’re having difficulty finding the funds to pay your expenses and fund the growth your business needs. Or your business can have good cash flow, but you’re profit is really lean or you’re just breaking even.

Unless you’re a not-for-profit, you’re in business to make a profit. However, unless you have an predictable cash flow, you spend more time worrying about how you’ll pay your overheads such as staff and expenses, rather than thinking about expanding and growing your business. It only takes a few small changes to achieve a better cash flow position for your business, which helps you maintain positive cash flow and generate profits. Here are some tips on how you can maximise your cash flow management.

 

1. Know your costs.

What are your cost base and overheads? Ideally you want more cash coming in than going out, so it’s important to know what your expected expenses and costs are so you can manage them.

 

2. Reduce costs where you can.

Everyone talks about reducing your expenses and it’s a solid strategy to improve your cash flow, but be mindful that you’re not cutting expenses for things you’ll need in the future. Review your expenses, see where you can maximise efficiency or reduce costs to help you reduce your cost base. If you hold inventory, consider decreasing the amount of stock that you hold, so that you don’t have so much cash tied up in holding stock.

 

3. Chase outstanding invoices.

It’s important to make sure you’re getting paid. If you’re waiting on a lot of businesses to pay you for goods and services you’ve already delivered (or paid for), then that will be affecting your cash flow. Check your payment terms – are you waiting too long for payment? Are you able to shorten the length of time you wait for payment? Also chase up outstanding invoices now, especially if you have generous payment terms.

 

4. Increase your marketing activity.

If you’re already running a lean cost base, then you need to increase sales. Be proactive about running targeted promotions and marketing campaigns. Think about where you’re most likely to reach the biggest chunk of your customers and focus your efforts there. As the old adage goes, ‘you have to spend money to make money’.

If you can keep the cash flowing, the profit will take care of itself. Once you have a good cash flow position, you’ll have cash to meet your overheads as well as cash for investment and to grow your business.

If you need help running the numbers or specific advice on how to improve your cashflow management, get in touch and we can help you work out your cash flow strategy.

 

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