Tips on How to Increase Your Cash Flow

Tips on How to Increase Your Cash Flow

Improving the cash flow of your business is integral to keeping it alive. While sales generate revenue, poor cash flow management will cause your business to bleed out money and go into debt, or worse. Fortunately, there are plenty of things you can do to increase or improve your cash flow.

Sell old or excessive equipment

Excess equipment not only takes up space but also possibly uses resources that could be allocated elsewhere, like electricity or manpower. If you have two printers but one of them is seldom used, consider selling it. Similarly, outdated equipment, regardless of sale value (or the lack of it) at the current time, should also be disposed of, because the space it leaves could be used for more efficient equipment or an additional desk, depending on how big it is.

Buy in bulk, pay in cash

Whenever possible and logical, buy items in bulk because this almost always leads to discounts. However, make sure you do not overstock—always keep in mind your current inventory. Paying in cash, while it may seem counterintuitive, actually has two benefits: first, it will reduce your payables. Second, and often overlooked, is the fact that most vendors prefer to be paid in cash, especially when they have an urgent need to be liquid. During these instances, they may be open to offering you discounts.

Encourage early payments

On the other hand, if you are the vendor who requires liquidity, you may consider offering discounts for early payments. For example, if you use a 45-day payment term, offer to lower the total invoice by 10% if the client pays within 10 days. Keep in mind however that using this strategy requires a strong collection team because clients can still pay late even if they promised to pay early.

 

Negotiate for part exchange deals

A part exchange is when a vendor and a client essentially trade goods or services as opposed to one party paying in return for the other’s services or products. Since both you and your client or customer value your products yourselves, the margin of your product effectively becomes the discount.

Avoid unnecessary upgrades

Every so often, a newer version of a product you are currently using will come out, promising better features and improved efficiency. This is especially true when it comes to mobile phones and laptops. Before upgrading to newer gadgets, analyse first if the improvements will provide any meaningful benefits to your company’s performance at all. In many cases, older mobile phones will get the job done just as well as newer models with bigger processors and higher RAM because these aren’t necessary when all you need to do is make phone calls.

Get better accountants

Sometimes, it seems like you are doing everything right, yet the money doesn’t come in any faster, or your expenses stack up quicker than they should. That may be due to faulty accounting—either the money is there but the reports say it isn’t, or expenses are not monitored very well. Consider the services of accountants Central London firms offer to ensure that your cash flow is recorded properly.

 

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