A fat cash flow is the result of operations that run efficiently and smoothly.
Here are FIVE simple ways to start working towards a fat cash flow:
Open a High-Interest Savings Account - Setting up a business savings account is an often-overlooked cushion that offers several benefits. It provides you with liquidity while growing your cash position. It helps you set aside a percentage of your income to pay your estimated taxes each quarter. It can bail you out in emergencies and cover unexpected expenses. Finally, opening a business savings account is a great way to build your business credit rating because it demonstrates to banks that you have the means to pay back borrowed capital.
Cut Down on Operating Cost – Take an inventory check. Those goods you buy that aren't moving at the same pace as your other products? They tie up a lot of cash. Instead of buying more of what doesn’t sell, get rid of it — even if you need to sell it at a discount. It's hard to walk away from products you fall in love with, hoping that someday you'll magically see heightened demand, but that almost never happens. Be objective, not emotional. Think power in numbers; find other like-minded companies willing to pool their cash in order to haggle lower prices with suppliers, who usually give big discounts to large firms who buy in bulk. Invoice immediately to see receivables come in more quickly.
Review Your Pricing Model - Increasing your prices is a concept that scares many business owners. They're worried it will lead to reduced sales. But it's OK to experiment with pricing to find the perfect number—how high are customers willing to go? There's no way to know unless you take a chance.
Go Electronic - If you pay electronically, you can wait until the morning of the day a bill is due to make payment. This buying of time improves your cash flow. You can also use a business credit card as some offer a grace period as long as 21 days, which can do a lot to increase your cash flow. You might even get cash back. But don't pile up too much debt. Take a look at your merchant statement – are you paying too much in fees? Use on-line tools available. Your bank can help you set-up a range of alerts and reminders related to cash consuming transactions with online banking, bill pay, tax payment, direct deposit, payroll and cash-management systems. These cost-control measures improve visibility related to expenses and allow you to gain better control over tomorrow’s profits.
Seek Professional Help – Arm yourself with a knowledgeable CPA – They can give you invaluable advises on business deductibles, favorable strategies for your revenue levels, annual sales, growth goals & retirement plans. Get a Bank/Banker who can point you in the right direction in terms of small business development. Especially at a local community bank, your banker is likely very plugged in to the professional services community. Bankers often have the advantage of being able to interact with a huge variety of professionals, and often have a good idea of who is working with whom and how that relationship is going. Talking to your business banker is a great way to prepare for expansion or contractions, identify new market segments, or determine if your business will be financially viable in a new area.