Maintaining cash flow enables you to keep the “lifeblood” pumping through your business during every cycle and season. Creating a solid cash flow strategy means looking holistically at your business to see where you can improve income and make sound expenditures. For some companies, cash flow consistently outranks profit in demonstrating the company’s fiscal health. During a period of significant growth in your business, as you focus on the future, maintaining your current cash flow has to stay on your radar as well.
Here are some ideas to help keep your business healthy while you’re growing it:
Hit the books. Get a good grasp on your current cash flow, and spend time making an accurate forecast for the future. According to Inc.com, “Quite often small- and mid-sized businesses aren’t prepared for all the costs associated with growing quickly. More sales could mean more employees and a bigger inventory. That’s money going out up front. But when will it come back?”
Analyze your revenue streams. What are your primary sources of revenue? How healthy are they, and are there areas you can improve to bring in more income? How quickly are you getting paid? If you are an agency that provides professional services, look for ways to diversify your client base—and work to create ongoing relationships, such as through a retainer, by offering discounts or value-added services. Other ideas for encouraging repeat business include loyalty programs or pre-selling products for a quick cash infusion.
Tighten up expenses. Are there ways you can streamline or renegotiate terms with your suppliers? Make sure you are getting the best deal on your normal expenses, from utilities to insurance. Are you taking advantage of incentives for paying your suppliers early, or stretching out your payables?
Try out some tricks of the trade. Depending on your business, you may wish to try a variety of new strategies aimed at improving cash flow, including paying biweekly or monthly instead of weekly, renting out excess office space, and filing income taxes on a cash basis.
Growing a business is a full-time job! Taking the time to ensure things are running efficiently will really pay off down the road.