Cash flow can be best described as the blood pumping through the veins of your organization. When everything runs ok, we take it for granted and don’t pay too much attention to it. However, even the smallest clog and even the smallest disruption can prove to be fatal.
Be that as it may, very few companies actually have a transparent view into the specifics of the cash flow, contingencies for the situations when the cash flow is disrupted, or cash flow management plans for promoting sustainable growth. Let us take a look then at a couple of strategies that should help you deal with these problems and make sure your cash flow is always able to withstand the turmoil your company is currently facing.
Keep a close eye on the cash flow
We will start with the first and the main part of this issue – the lack of cash flow transparency. To do that you will need to keep a very detailed record of all cash and cash equivalents entering and leaving your company. Also, do your best to put a greater emphasis on the cash flow statements (CFLs) since, unlike income statements, they are taking into account the assets that are leaving the company so it tells not only how much money the company generates but also how well it manages its cash position. These reports can uncover very valuable insights that are otherwise lost in the income and outflow sheets.
Increase the total revenue
In this case, you don’t really have to innovate – just emulate the strategies that have shown success in the previous years. A higher level of sales automation has produced great results in encouraging stable business growth. Also, you can review your marketing methods and implement the more reliable KPIs to find out which channels can be improved. Does your company have an established sales process or do the sales take place ad hoc? In the latter case try to pen the systematic, repeatable, and streamlined series of steps and interactions your customers need to take from the first engagement to the final sale.
Diversify revenue streams
If your cash flow depends on a singular source of revenue even the smallest bottleneck can cause severe disruptions. Fortunately, the options for diversifying the income sources are plentiful. For instance, you can expand physical sales online and start an e-shop or offer your customers a subscription option with exclusive content. If you have a fleet sitting unused for a better part of the day, you can rent it or start your own small delivery service. Or to monetize your expertise through online classes. All these different revenue streams keep your company operational even when the main product line is underperforming.
Image by rawpixel.com
Collect the invoices faster
The performance of your cash flow system will to a large extent depend on the efficiency in which you are able to collect the invoices. Of course, the sooner you manage to do that the better so offer small incentives for customers that pay early. If that’s not possible and you still need the funds to cover up your own expenses you can always look for a professional debtor finance service and collect as much as 85% of the invoice value within only 24 hours. The service provider then takes the debt on its own shoulder, waits until the invoices are paid in full, and transfers the rest of the money to your account when everything is done.
Use the latest, cutting-edge tech
Companies intending to maintain a stable cash flow need to establish an efficient and streamlined internal infrastructure that promotes productivity and allows employees to perform their critical tasks on time. These efforts can be helped by the implementation of high-tech solutions designed to improve the efficiency of a growing company.
These improvements can be established in a spectrum of areas ranging from communication infrastructure that allows seamless collaboration to responsive UX design used to increase the conversion rate on your website. The more of these boxes you check the better.
Image by rawpixel.com
Tighten up the outflows
Last but not least, we need to address the other important aspect of your cash flow and that is the way your company spends the money. Obviously, your goal here should be to cut all unnecessary expenses, sell the slow-moving assets or obsolete stocks and make your premises and assets more sustainable.
If you still experience financial problems at the end of the month try to reach a long-term agreement with suppliers that will open up the way for lucrative discounts or at least expand the payment window. Consolidating existing debts could save you a lot of money you are spending on scattered interests.
We hope these few examples gave you a general idea about the strategies you can use to make the cash flow of your company more transparent and efficient and thus set the foundation for its growth. At the end of the month, the only thing that separates successful companies from their less fortunate peers is that they manage to earn more than they spend. Keeping a healthy cash flow makes an integral part of this process. So, don’t allow your company to fall over such an important hurdle.