In my thirty years of working with small businesses, just about every business owner that I have worked with is surprised at the amount of cash that they are leaving on the table. In tough times, like now, tracking every dollar your business uses and making sure your cash is spent wisely will lead to more cash in your bank account. Making changes early on can be the difference between success and bankruptcy. Here are some ideas that usually increase business cash flow quickly:
Almost every business is ignoring one sales area that is a goldmine – their current customers! If the business owner works on nothing else they should work on the following systems:
1. Improve your systems to increase your lead conversion rate. Your goal is to turn more of your customer contacts into sales.
2. Improve your systems to increase the order size by up-selling. Create a list of products and services that logically go together and make sure your staff is trained to offer them to every customer.
3. Improve your systems to increase repeat sales. Develop incentives for your customers to shop with you more often. Offer your customers incentives for repeat business. Increase your communication with your current customers about new products and services that you have that will solve their problems.
4. Improve your systems for customer referrals. Ask for referrals from your best customers. Pickup The Referral Engine by John Jantsch for great ideas on getting referrals.
(If you need help creating profitable systems, call our office at 915-857-8158.)
In case you didn’t know, every week in our blog we have marketing & selling tip of the week, there we have a catalog of different way you can increase your sales. Go review them for some great ideas
Increase Your Prices
The quickest and easiest way to increase your income is to raise your prices. If you are worried about losing customers, do the math. You will be surprised by how many customers you can lose and make the same sales amount. And, most business owners find that they make more money with less work.
Speed up your collections
Review your receivables now and every week. Call every customer who is past due as soon as they become late. There is no secret to collecting receivables – the owner just has to stay on top of it constantly! Don’t let someone else’s cash flow problem become your cash flow problem.
Avoid receivables entirely by getting prepayments, larger down-payments or requiring payment at the time of delivery. Additionally, speed up your billing cycle by billing weekly instead of monthly. As a last resort, look into receivable financing.
A ten percent across the board cost cutting approach probably won’t work. Cutting advertising will probably cut sales also. So, the proper method is to review all expenses line by line and look at ways to eliminate or reduce the cost. If you haven’t bid an item out recently you are probably spending too much on it.
Before you pay for anything, ask yourself, “Can I live without this right now?” If you can – wait! Keep the cash in your bank account for as long as you can.
Slow Down the Cash Going Out
Keep an eye on your inventory. Don’t let it grow! Don’t buy until you have to. Sell old inventory at any price. Receiving anything now is better than maybe receiving zero later. Ask your customers to supply raw material. Investigate just-in-time inventory options. Again as a last option, look into floor plan financing.
Your suppliers have a stake in your survival so they will often work with you if you can show them it is in their best interest. Ask for longer payment terms even if you have to offer to pay a slightly higher price (of course keep an eye on your margins and whether you can pass these costs onto your customers).
There are many more things that you can do to increase cash flow. Give us a call at 915-857-8158, if you want our help brainstorming ideas. Also, leave a comment if you have any ideas that you have used that I may have overlooked and would like to share.