Having a steady cash flow is a must if you want your company to grow and evolve. There are a lot of aspects of business that require regular monthly payments so it is essential that you have the funds for that. Having all your money tied up can end up costing you your company. So let’s see what are the necessary steps in order to improve your current cash flow and ensure you have a steady financial situation for the foreseeable future.
Always plan ahead
This is essential, when running a company you can go month by month hoping that everything will go according to plan. It is far more important to have a clear plan for the next six months to a year, that way you can ensure there is little left to chance. It is completely ok to feel optimistic about your business and to have high hopes that it will take off masterfully. However, realism is a must as well. So make sure you have everything in place to secure your company’s future if things don’t go exactly according to plan. If you don’t have time to make a realistic forecast regarding the amount of cash flow expected for the next few months, you should have an accountant do it for you. Yes it is an additional investment but it is a smart one, that way you can have an idea how much you can actually afford to spend and what your priorities should be.
Inject some additional funds
If it seems like you won’t be able to generate big enough cash flow for the upcoming month, opt for reliable quick loans that can help you smooth out the current problem. And with the adequate interest rate and payment plan you can repay it in no time and your company will continue to go forward. A loan is a far better option than borrowing from friends and family or selling assets. Involving family in your business can lead to strained relationships, while selling assets should be your last option. Asset acquisition is not easy, and it requires a lot of investment, so if you are lucky enough to start off with several assets, postpone the sale for as long as you can.
Find different ways to accelerate payments
This is important. You can’t wait forever to get paid for your product or service. You need to have a clear picture as to when you can expect payments and how long you can afford to wait. It is important to establish a regular discipline of invoicing, collecting payments, and getting them into the bank on time. If you invoice your customers on time they are more likely to pay it sooner and you can retain that much needed cash flow. Avoid piling up invoices and sending them a week or two later, that has a direct influence on your cash flow and you will be sabotaging your own business that way. Another option is to offer multiple payment options to your customers. That way they might get invited to pay more quickly, and you will get more out of the business relationship.
Reduce your need for inventory
When we get those first funds from the sales in, we tend to splurge and get additional inventory for our business. Well, don’t. You need to realize that you will need the funds to keep your business going. There is no guarantee that you will generate enough income every single months. So it is always better to save the money you get and make smart decisions regarding inventory. Buy only the essentials to keep everything running, everything else can come later on, when you have generated a surplice and actually have money to invest back in your company. Of course, you need to have enough in stock as to provide your customers with a quality service and not make them wait. But the best option is to make a forecast regarding the expected sales and invest in the inventory accordingly. Having too many items that are not selling at the desired pace can cost you your company.
So there you have it, the four essential steps you need to take to keep your business running smoothly. Having a steady cash flow is an absolute must if you want to have a successful company that has enough room to grow. Having enough funds to pay for things like space lease, materials and of course, paychecks is non negotiable if you want your company to go forward. So it should definitely be your top priority. And a lot of it depends on you, your ability to plan out the financial forecast, make important cuts and invest even some of your own funds when times get tough.