8 Effective Methods to Improve Cash Flow Part 1
It’s often said “cash is king,” and cash flow is the lifeblood that fuels the sales muscle of any business. If we know this to be true, why don’t we do more to control and create abundant cash flow?
Many entrepreneurs and business owners focus most of their time on driving revenue, sourcing new clients, and taking down the next deal.
Their passions and emotional needs are met by “the hunt,” and they refer to this as the fun part of their job.
The day-to-day activity of invoicing clients and collecting money in a timely fashion can be a Herculean task that’s often easier said than done—so they avoid it.
Though essential, the back and forth, give and take of regularly negotiating with clients can take an emotional toll as the client wants to buy at the lowest cost possible, and your goal is to negotiate the highest price possible.
Discounts have their place, but only when you can still maintain decent margins, and it’s part of a greater strategy—like increasing short-term cash flow.
I regularly see business owners who impulsively discount their already low-priced goods and services in order to secure a deal or to avoid a sense of conflict. Left unchecked, this can quickly put companies into a cash crunch.
Today’s dose of reality is this: YOU are the most important person in the process of improving cash flow. YOU must take the lead in developing an action plan to fix any cash flow shortages you’re experiencing.
With that in mind, here are four ways to immediately improve your personal or business cash flow.
For the others, please get our new ebook, “48 Powerful Ways to Immediately Improve Your Personal and Business Cash Flow”:
Many households are dropping their cable and satellite services completely and opting for streaming options instead.
If you choose to keep your cable/satellite service, review your bill for channels or services you don’t use.
Call the company and ask to speak with their Retention Specialist. Let them know you’re considering dropping their service, or perhaps switching to a competitor (cable to satellite or satellite to cable) and ask if there is anything they can do to help you reduce your bill. You may have to sign up for a 12-month extension, but for the right price reduction, why not?
Rapid Action Discounts
If you have potential clients who have been sitting on the fence who are not sure whether they should purchase your product or service, offer them a special, one-time only, Rapid Action Discount.
If they order and pay in the next 48-hours, they receive a 10%, 15%, or 20% discount (of course, choose your discount based upon your margins for that product or service).
Raise Your Prices
Too often I see business owners suppressing and reducing rates, fearing if they increase pricing they’ll lose customers, yet the price is only one ingredient why customers buy from you.
Prepare a Competitive Set Analysis to review what pricing, services, and amenities your competitors are offering, then be bold about announcing a price increase on an upcoming date.
Let current and past clients know about improved service offerings (if you need to do that to stay competitive), and give them an opportunity to renew contracts to secure current pricing, or to stock up and save now.
You may lose a few clients, but your price increase will offset any loss. Being the low-price leader is rarely a recipe for success.
Finance Your Business
Most small companies self-fund their growth through Free Cash Flow (FCF); meaning capital improvement expenditures, product launches, R&D, and hiring of key personnel are contingent on FCF.
However, securing short-term debt to cover capital needs can be an effective means of financing growth while preserving precious cash.
Many low-cost capital sources are available to privately-held companies including SBA loans, Asset-Based Lending, Lines of Credit (LOC), sale/leaseback arrangements, receivables financing, and fixed-term debt.
Exercise caution when securing the long-term debt, as it can have a negative impact on company valuation if it does not finance profitable growth.
Do any of these resonate with you? Can you share one tip from your own experience? Please comment below.