Cash flow is king - but it can be a struggle for many companies. It's a constant balancing act - and not just a matter of bringing in more revenue. Limiting cash outflows is also a critical part of the equation.
Positive cash flow gives you the room to effectively run, and continue growing, your business. When your cash flow dries up, however, it can quickly start restricting business operations.
Here are five quick ideas to improve your business' cash flow and get on the road to greater business success:
1. Know where you stand
Before you can improve cash flow, you need to start with understanding the business' revenue and expenditure. You need a clear view of your accounts payable and receivable, credit conditions and stock levels.
If you're using an ERP system that brings together all your core business data and delivers a single source of truth, you've already got the right tools. But you still need to use the information and key metrics available and get a clear view of your business position. Take a look at the reports you have in place and how accurate (and up to date) your data is when running your cash flow report. The right reporting can give you clarity on what's working, what's not, and where you need to make changes.
"By invoicing customers immediately after completing a service or shipping an order, you can speed up how quickly you receive outstanding funds - which helps keep that cash flow healthy."
2. Invoice in a timely manner
Many businesses using spreadsheets or multiple systems rely on manual invoicing processes. Without an automated way of invoicing, it's tempting to wait until the end of the week or the month to send out invoices in bulk. If this sounds familiar, it could be time to review your invoicing process. By invoicing customers immediately after completing a service or shipping an order, you can speed up how quickly you receive outstanding funds - which helps keep that cash flow healthy.
3. Reward for fast payment
Consider offering your customers a discount if they pay your invoice immediately or within a certain timeframe. For example, you could give a 2% discount to customers paying within ten days of invoice to help boost your cash flow.
"If you have a lot of stock sitting on shelves without being constantly refreshed, it may be time to revisit how effectively inventory is being managed. If stock isn't moving, it means money is being tied up - and could actually be hurting your cash flow."
4. Pay suppliers on time
To maintain good supplier relationships, you want to pay your bills on time. What you may not want to do, however, is to pay those bills too early. Would you rather that cash sitting in your bank account or your suppliers' bank accounts? It's critical to check suppliers' payment conditions and put the right processes in place to ensure payments are scheduled for their due dates. Of course, if your suppliers offer discounts for early payment, you might have the chance to see additional savings. Understanding your suppliers' payment terms and organising payment schedules can really increase your cash on hand.
5. Manage your stock
If you have a lot of stock sitting on shelves without being constantly refreshed, it may be time to revisit how effectively inventory is being managed. If stock isn't moving, it means money is being tied up - and could actually be hurting your cash flow. A cloud-based ERP system gives you live reporting on stock levels, sales figures, customer buying patterns and historical trends. Make sure you use this valuable data to improve your inventory management, cash flow and overall revenue.
If you'd like to know more about how an ERP system can help you improve cash flow, give you live visibility across the business, and help increase profitability, get in touch for a quick chat about your business needs.
Looking to increase sales? Download your 5-step strategy guide now for all the ideas: