An ineffective or non-existent cash flow system is one of the leading causes of debt in business. For this reason, I’ve developed 6 ways to improve your cash flow management in your company, which can be implemented no matter how small or large your business is.
1. What’s your “break-even” point?
Make sure you understand all your regular debits, up-coming payments, and income to get a clear idea of this number. You cannot be consistently profitable if this number is not accurate and reasonable.
2. Have Cash Reserves
You can’t plan everything, and unexpected issues are bound to arise. This is why you should always have cash reserves handy, so you don’t need to dig into credit cards or other expensive alternatives. Similarly, if you earn more money in a period unexpectedly, it’s a wise option to top up your cash reserves with the spare money.
3. Collect ASAP
Businesses who don’t require immediate payment can find themselves being treated as a short-term lender, where you end up paying the price. Do what you can to discourage this behaviour, and create incentives for to pay immediately.
4. Establish Policies & Procedures To Control & Conserve Cash
Set strict rules for giving refunds and if you can, avoid providing refunds in the form of cash. Instead, a great option is allowing exchanges for a similar product or service. This will reduce fraudulent returns and conserves cash on hand.
5. Adopt An ePOS System
A point of sale system (or ePOS) automatically tracks all incoming payments and inventory changes as it processes someone’s payment for your product or service. For service businesses, ePOS makes it easy for a customer to tip and for the organisation to properly record tips.
6. Marketing, Done Right
Marketing can make a break a business, so you need to be smart here. Rather than placing huge discounts on your valuable products, consider marketing that doesn’t hurt the bank as much, For example, sponsoring a content and giving away one of your items is a great way to build brand awareness and social media engagement.