by Asa Beavers
There are many ways to go about growing a business, but at the end of the day, as the old saying goes, "cash is king". Businesses that measure their success too much on revenue and not enough on profit always seem to be surprised when cash is short. So here are 12 ways to reduce your cash cycle and improve your cash flow:
- Stop saying, "Well, this is just the way it is." Because it's not. If this is your mindset then reset your thinking. Other business owners are figuring it out and so can you.
- Have your available cash reported DAILY. Chart it against accounts receivable and payable weekly. You'll learn so much about your business when you see how the cash is flowing on a daily basis.
- If you want to be paid sooner, you have to ask. Many companies will pay quicker if asked. Some will even prepay, but you have to ask (sometimes repetitively).
- Give value back for customers that pay in advance or on time. After all, these are your "A" customers. Take good care of them.
- Get your invoices out quicker. Make sure invoices are timely and followed-up. You might want to find out how your clients want their invoice structured. You might also want to consider changing the color of your invoice from the standard white to blue so it is noticed in the huge pile of invoices sitting on the desk.
- Understand why your clients are paying later - many times there are recurring mistakes on the invoice or the invoice is not structured to make it easy for the customer to reconcile.
- Understand your customers' payment cycles and time your billings to coincide.
- Pay many of your own expenses with a credit card so you can play the float and get your own customers to pay by credit card.
- Help your customers improve their cash so they can pay you - offer them leasing or payment options, for instance.
- Shorten product and service delivery cycle times. The quicker you complete projects, the quicker you get paid.
- Have such a valuable product or service that you have some leverage with your customers to pay sooner.
- Of course, improving margins and profit, improves cash.
Every business could benefit from increasing their awareness on cashflow. And what it takes to reduce your cash cycle almost always leads to much greater operational excellence and customer service.
About the Author
Asa Beavers is a small business coach and consultant. He shares tips, techniques and strategies with smalll business owners to boost clarity and focus, create strategic action plans, and increase sales and profits. Visit his website at www.redlinebsg.com, email Asa at asa@redlinebsg.com, or call 919-367-0790.