In starting a business, there are many factors to cover, different perspectives to observe, and risks to consider. Amongst them are your business’ cash flow. It is important to understand and gauge what works and what hurts your capital. In business, money matters. Improving cash flow is not all about bringing in more money, but also about how you can lower your expenses.
1. Leasing Equipment
A common rookie mistake when starting out a business is the idea of owning your own assets such as real estate, equipment, supplies, etc. Unless your startup or company is sitting on a pile of gold, this might not be the most economical way to kick-start your business.
Consider leasing these assets. Understandably, the overall cost of leasing would usually turn up higher than actually owning the assets. However, leasing brings in a number of advantages to the company as well. The ultimate goal here is to be able to maintain your day-to-day operational cash flow.
Amongst other advantages of leasing are:
✓ Tax Deductible
Lease payments can be written-off as a business expense, therefore positively affecting your leasing net cost.
✓ Lowering Initial Costs
Equipment leasing would rarely incur down payment costs. Thus, you can get your hands on your equipment without burning through your pockets.
✓ Staying Competitive
Technology is evolving by the minute. Leasing equipment makes it easier to constantly change to improved or enhanced equipment to ensure business performance is on par (or better than) the industry standards.
2. Improve Your Inventory
Always keep track of your inventory. The most obvious information you need to keep an eye on is the movement pace of the products in your inventory. Should you find a product that doesn’t sell as well as your other products, your first impulse should be to get rid of it. These products can put in hole in your capital and hurt your cash flow.
At times, it will be hard to leave behind products that you have hoped to explode in the market, but you must remain objective. If it’s not helping your business, it most probably is hurting your business.
3. Manage Customer Payments
Great businesses also rely on their customers paying their invoice when due. After all, without the influx of cash flow from customers, the day-to-day operational expenses could bring your company to the ground. This all comes down to managing your customers and their payments. There are a few strategies that can help with ensuring a healthy cash in-flow.
✓ Prepare the Invoices Immediately
This is simple science! The faster your customer is notified on the bill that’s due, the faster they can process their payables to you.
✓ Send Out Reminders
Alas, customers are also human. And at times, need to be reminded of things that may have slipped their minds. It is always good practice to send out bill reminders to customers when their payment is almost due.
There will come a time when there will be one too many invoices to keep track of. At this rate, the best course of action is to automate your business digitally to maintain efficiency. A good software such as GoKudos, an AI Debt Collector, can help a business with tracking invoices, whilst automatically sending out reminders when payments are due.
4. Reevaluate Operating Expenses
As your business progresses, it is always beneficial to take a step back once in a while and reevaluate all cash out-flow of your day-to-day expenses. In time, certain expenses will grow to become unjustifiable and irrelevant to the company, thus straining your cash flow. It is necessary to root out and eliminate these kinds of expenses to ensure a healthy growth in your bank accounts!
5. Streamlining Processes
Apart from reevaluating costs, it is also good to periodically check on your business processes and think of improvements that can be made. It’s time to ask yourselves, “Can I speed up the production time? If yes, how?” or “Should I start using a CRM software?”
These improvements can play a big role in growing your company, not just in terms of costing and profit, but also in terms of efficiency and productivity.