Capital is the magic ingredient in helping to expand of your business.
“Cash flow” involves deferring outgoing expenses long enough to ensure your business has sufficient incoming revenue to pay for overhead costs and leave a small amount for profit. There are times discovering the right balance between “cash in” and “cash out” seems like rushing to find that famed pot of gold at the end of a rainbow – in other words, a challenge.
Profit will strengthen your capital, which you can spend to expand your business. It’s so easy in principle, but in reality a number of businesses have to deliver their services first for a time before they register any income.
So, follow these three tips to help strengthen your cash flow – to provide your business the cash and stability to expand:
1. Receive payment faster.
You have to fix it if you are not sending out invoices promptly. Think about this: each minute that passes by when an invoice is not being sent out to your customer your business is losing money. Get your invoice process in order to build up your business bank balance.
Send out invoices promptly and convert orders/quotes into invoices with a click of a button through online accounting software, or an integrated business management solution. Also, make it easy for you to see customers who owe you and the date it was owed with dashboards that display aged debts.
2. Minimise stock levels.
A business is losing money from stocks that remain in storage. Stocks are a necessary expense for businesses that are into selling products. However, it is hard to find the right spot between too little and too much stock. You need the right inventory system to hit this right spot.
You can improve your purchasing decisions with simple things such as establishing minimum/maximum inventory levels and instant re-ordering, being aware of what sales are incoming, knowing what trends or seasonality changes you need to watch out for or checking the newest exchange rates.
Visibility over stock is a major problem. You can automate your re-ordering and make sure stock is always available by switching to an integrated business solution. This will grant you access to money that you can invest back into the business.
3. Cut down on costs and overheads.
Bringing in more cash and spending less cash is the most straightforward way to strengthen your bank balance. A great way to check the improvement in your profit equation is by cutting down on operating costs and overheads.
Here are tips to reduce your overhead and operating costs:
- Outsourcing: This is a good way to curb costs either while expanding or when you have to trim down some overheads. IT and administration work are two areas that can be outsourced.
- Suppliers: Think about choosing one supplier if you are presently ordering stock from several suppliers. Fixed costs and higher volumes will be a great help to suppliers, while your business can gain from reduced costs and ease of managing relationships.
- Budgeting and forecasting: Be aware of your bills and check your important figures regularly to allow you to identify trends, opportunities or risks. Be practical about expenditures, set aside the right resources to projects, track performance, reinforce decision making, spot problems before they arise, and reach your targets.
- Systems: Utilising a business management solution frequently delivers calculated cost savings from improved transparency, trimmed down administration time, improved time billing, savings from stock management upgrades, etc.
You can improve your business bank balance in many ways. You can implement some directly, but others need the use of software or a process shift. Your skill in increasing your cash on hand to aid expansion is what single out your business from its competitors.
Do you need advice and guidance to improve your business and take it to the next level? PJS Accountants work to understand your business and its inner workings and how it can compete effectively in the present business environment. From this knowledge, we can come up with a custom plan to implement your business strategies and methodologies, boost profit and increase market shares. Visit one of our specialist advisors or contact PJS Accountants.