Break the Cycle: Strategies for Improving Your Cash Flow

In the last edition of The Scoop, we talked about one of the biggest fears that business owners have: their main revenue streams drying up. We touched on the fact that all revenue streams will most likely change or dry up eventually, as markets shift and consumer preferences change. The key is to avoid falling into a victim mentality and, instead, closely analyzing what works and what doesn’t work for your business.

In this edition of The Scoop, we’re going to cover a connected topic and share some tangible, concrete ways that you can improve your business’s cash flow and help protect your business from changing revenue streams. Here are a few of the effective strategies that you can implement.

Negotiate Quick Payment Terms

One of the most important parts of cash flow is actually getting paid by your customers and clients—and in a timely fashion. Making that big sale is great, but you also have to make sure you get paid for it. To help get the money you’re owed and keep your cash flow as strong and consistent as possible, start by negotiating terms with your clients to make the payment deadline as early as you can. You could also ask for a partial deposit upfront to immediately generate some cash. If your client is late on a payment, don’t hesitate to reach out and remind them.

Check Your Accounts Payable Agreements

Just as you want to speed up accounts receivable and getting paid, you also want to slow down your accounts payable, if possible. Instead of sending a check as soon as a bill comes in, check the terms of your agreement to see how long you can wait on paying it. Even just waiting a little while and delaying the payment could help prevent a cash flow disruption and cash shortage.

Lease instead of Buying

This might seem like a counterintuitive suggestion since leasing tends to be more expensive than buying in the long term. But if we look beyond the bottom line, unless you already have a large cash reserve, you’ll need to maintain a cash stream for day-to-day operations. Leasing allows you to make small payments. What’s even better is that lease payments count as a business expense for tax purposes.

Optimize Your Inventory

An optimized inventory can really work to your advantage. A detailed inventory check will give you a clear idea of which products or services are moving at a slower pace and therefore hurting your cash flow. These products are probably not going to magically become bestsellers; your best bet is to sell them off as quickly as possible (even at a steep discount) and focus on what’s really been making you money. Just like we mentioned in the previous Scoop, maintaining healthy revenue streams and a strong cash flow comes down to honestly analyzing what is working and what isn’t working for your business.

Be Careful How Fast You Grow

Too rapid growth can create big cash flow problems for businesses of all types. While growth is what you’re ultimately aiming for, moving too quickly can drain your reserves and send you into a negative cash flow situation if you find yourself needing to use credit to pay for new employees or equipment. While setting up a line of credit is a good backup solution, the best tactic is to be conservative about growth, especially during your start up period.

What You Can Do Moving Forward

Improving your cash flow and creating strong revenue streams is all about putting the right systems in place and taking small steps each day. If you’re looking to make your cash flow better, then my team can help! I’d love to set up a consultation and help you improve both your short term and long-term finances.

Click here to schedule a call.

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Check Out Our Cash Flow Management Services

As tax and accounting professionals for small and medium sized businesses, our expertise lies in helping business owners manage their cash flow better with the goal of increased profitability.

Here’s what we do for you:?

• Develop short and long term cash projections
• Analyze prior years cash flow statements to help you understand where the money goes
• Prepare monthly, quarterly, and annual cash flow statements
• Provide you with tools to accelerate the collection process
• Develop updated billing and payment policies
• Assist with obtaining a line of credit
• Help you get the maximum rate of return on surplus cash

Avoid a cash crisis, call us first. We are here to help.

Schedule a Call with Us.

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Client Success Story

A lot of my clients come to me with some level of apprehension.

Why?

Because they feel like their books and records are too far gone and in such bad shape that no one would be able to help them.

They may even be embarrassed because a previous accountant or bookkeeper wasn’t up to the challenge.

That’s the story for an amazing client of mine, Diane Glander. She’s the real estate team leader of The Glander Group at Coldwell Banker.

Her books were in bad shape, but my team was able to straighten things out, organize her records effectively, help her develop respect for her business’s money and where it was going, and more.

See her full story of how she found us and how we helped her by watching this video.?

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Tune In to Our Weekly CFO Scoop LinkedIn Lives

Don’t forget that I’m doing LinkedIn Lives most Tuesdays! Tune in for tips, insights, and best practices around business growth, tax optimization, developing an abundance mindset, and more. Leave us a comment to let us know what topics you’d like to see covered in these weekly lives!