- September 18, 2021
- Posted by: vmayo
- Categories: Accounting Services, Cash Flow
Understanding the difference between assets and cash flow is vital to the survival of a business. Working with an outsourced accounting department allows company executives to analyze and improve cash flow while securing the future of the organization.
The key to increasing cash flow is not only bringing in more cash inflows, but also limiting your cash outflows. This means you have to manage your expenses as much as your sales. Read on for ten practical tips to help improve your business’s cash flow.
Business by Improving Cash Flow:
1. Cash is Life:
The value of a company is not necessarily related to how strong it is financially. Recent events show how even multi-billion dollar corporations can face cash flow problems. Industry leaders default on loans because their money is tied up in non-liquid assets to improve cash flow.
A strong cash flow allows a company to operate. This allows the organization not only to pay for current expenses, but also to respond to changes in the market. Sudden cost increases or, as has been the case recently, a drop in revenue can destroy a company without a strong cash flow recovery.
Now more than ever, businesses must revamp their cash budgets to remain viable. Organizations working with virtual accounting departments have access to the necessary information and expertise, freeing up necessary resources.
2. Reduce Expenses:
Consumers are buying less and revenues are falling in almost every industry. One of the most immediate ways to maintain profitability during falling revenue is to find ways to cut costs.
In a minor recession, reducing luxury expenses or occasional costs is an effective strategy, but today’s businesses need to be more aggressive in improving cash flow.
Executives are working with outsourced accounting departments to analyze fixed expenses and find ways to save money over the long term to improve cash flow.
Companies are negotiating with vendors to make new deals because those sellers will offer lower prices rather than losing attractive customers. Rent, utilities or office supply costs can be deducted to improve profitability.
Another way companies are saving money is by reducing inventory. While organizations still want to keep enough stock to satisfy customers, inventory can also be reduced when customer traffic is low.
3. Raise Revenues
Some business owners are cutting prices in hopes of attracting new customers. However, in many cases the deduction only reduces cash flow. Other owners are trying a radical strategy of raising prices.
Small price increases often have little effect on sales volume but can significantly improve profits. Improve customer traffic by spending more time marketing rather than cutting prices.
Inexpensive promotional campaigns can attract an organization to new segments of the consumer market, improve cash flow and bring in additional business.
Other companies are using this as an opportunity to introduce new products or services to attract a larger segment of the population. No one strategy works for every business.
This is why it is so important for a modern company to work closely with an outsourced accounting department. Only with a clear vision of the company’s financial position can managers make effective decisions about the future of the organization along with improving cash flow strategy.
4. Increase Prices:
If your cash flow is poor, it may be time to consider increasing the prices for your products or services. Ask yourself:
- What are my competitors charging?
- Have equipment or inventory prices increased?
- How much manpower is required for my inventory assembly or services?
- Do my prices cover the time it takes to make my products?
- Are my prices too low? Do my products seem cheap or pricey?
You want to strike a balance between keeping your prices competitive and getting fair reimbursement for the hard work you and your employees put in.
5. Expand Sales Market:
Another way to increase positive cash flow is to brainstorm new sources of income. Bring the dream team together, sit down with some coffee, and consider new ways to expand your sales market. Here are some new sales prospects to pursue ideas:
Add new products and services:
Think about the current goods or services you provide and consider whether there are other goods or services that you think would be a good addition to your business. Think out-of-the-box and also consider alternative ways to earn income.
Create a new marketing strategy:
If the products you offer are already spot on, perhaps your marketing can be expanded. Think of new ways to talk about your business. Consider whether there are any other groups of people who might benefit from what your business has to offer. Bringing in more customers is a great way to bring in more cash flow.
Encourage customer to buy more:
Another great way to improve cash flow is to motivate your existing customers to spend more. There are two great ways to do this:
- Bundle Items: Sell similar items together to encourage increased spending.
- Advertise related products: If you use an eCommerce platform, advertise additional products that the buyer “might be interested in” or “others have also bought.”
Don’t forget your loyal customer:
Another great way to expand your market is to let happy customers do it for you. Encourage loyal customers by implementing discount or rewards programs such as stamp cards for multiple purchases. Also, consider implementing a referral program. This way you can encourage your loyal customers to grow their business for you through word of mouth.