Business Tips to Maintain a Positive Cash Flow

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Published: 25th October 2012
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Having problems with your cash flow?

Most small business owners often tend to find themselves in a reactive cycle when it comes to matters of cash flow.

Each month, most small business owners tend to typically start hoping that they will come out ahead after payroll, inventory purchases, and other overhead. When that happens, all is well with the world. But, on the flipside, once they come up short, most small business owners, then, tend to typically panic and frantically scrambles to make ends meet.

With this cycle, it can prove to be exhausting and demoralizing. So, here are the tips to maintain and also improve a positive cash flow.

-Create a sales forecast. Though you might find it hard to do in the beginning, after running your business for a few months, you will should have a good idea of how sales will stack up month to month. Take a look at your inventory and know which items move quickly and which have been gathering dust for a while. Have a benchmark for what you think will happen. Make sure to forecast out by month, category and what revenue you anticipate based on history. Make it more detailed. With these forecasts, you may end up finding the cash required to make purchases for your business.

-Manage Your Business Costs. In protecting your bottom line, you do not only need to focus on increasing your income, but you also need to reduce your expenses. The key to achieving a positive cash flow is to do understand simple things such your cost centres and review their numbers on a monthly basis against budgets.

-Work Out an Inventory Management Plan. After finishing writing out your sales forecast, itís now time to think about inventory. Make sure that you do not go overboard when purchasing inventory. Business management experts say ďless is moreĒ. This is because lean inventory means that you are not investing precious cash in unnecessary, excess inventories.

-Make A Discount Incentive Program For Early Payers. Give rewards or incentives to any customers who pay on time or who pay before the due date. This strategy can help entice customers so you can get the ball rolling towards you all the time. Consider also offering a cash discount to customers that pay in a short period of time, designated by you, or to a customer who pays cash.

-Ask for Full or a Portion of Payment Up Front. Ask for at least a deposit up front as this is a great way to jump-start your cash flow and gets a firm commitment from your clients.

-Closely Manage your Receivables. Make a detailed ďagingĒ schedule of what you are owed, by whom and for how long. Donít forget or hesitate on calling overdue accounts quickly, focusing first on the largest amounts due. Make sure to ask if there is anything you can do to expedite payment. If you can, introduce a automated debtors follow up system which will reduce the time required by administrative employees in following up clients that havenít paid.

-Encourage Repeat Business. Devote your efforts toward getting customers coming back and more often. Try to consider offering loyalty programs, VIP offers and other frequent-shopper programs. Also donít forget that the word "free" is a popular incentive among shoppers, and though it may seem costly, in reality, you may easily cover the costs of funding a freebie as long as you're dealing with excess inventory or low-cost, but valuable add-ons.

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