What are the most effective cash flow strategies during uncertainty?

1 Assess your cash flow position

The first step to improve your cash flow is to understand your current situation. You need to track and forecast your cash inflows and outflows, and identify any gaps or risks. You can use a cash flow statement or a cash flow projection tool to help you with this. A cash flow statement shows you how much money you have generated and spent in a given period, while a cash flow projection tool helps you estimate how much money you will have in the future based on your assumptions and scenarios. By assessing your cash flow position, you can spot any problems early and take action accordingly.

3 Increase your revenue

Another way to improve your cash flow is to increase your income. You should look for opportunities to grow your sales, expand your customer base, or diversify your revenue streams. For example, you can offer discounts or incentives for early or bulk payments, upsell or cross-sell your products or services, create new packages or bundles, or enter new markets or niches. By increasing your revenue, you can generate more cash and offset any losses or fluctuations.

4 Manage your inventory

If you have a business that sells physical products, you need to manage your inventory carefully. Inventory can tie up a lot of cash and affect your cash flow. You should aim to have enough inventory to meet your customer demand, but not too much that it becomes obsolete or wasteful. You can use inventory management software or techniques to help you with this. For example, you can use the just-in-time (JIT) method, which means ordering or producing inventory only when you need it, or the economic order quantity (EOQ) method, which means ordering or producing inventory in optimal quantities that minimize your costs and maximize your profits. By managing your inventory, you can optimize your cash flow and avoid overstocking or understocking.

6 Seek external funding

Sometimes, you may need some extra cash to cover your cash flow gaps or to invest in your growth. You can seek external funding from various sources, such as banks, investors, or government programs. However, you should be careful and selective when choosing your funding option, as each one has its own pros and cons, such as interest rates, repayment terms, or equity dilution. You should also have a solid business plan and a realistic cash flow forecast to convince your potential funders that you can repay them and that you have a viable and profitable business. By seeking external funding, you can access more cash and leverage other people's money.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?