Cashflow is one of the most important things to get right in your business, and can feel like the most daunting to address. But did you know that there are a number of simple things you can do to improve your cash flow? Here is our Checklist of important cash flow boosting steps to get you started:
1. Put together a good cash flow forecast
Like a budget your cash flow forecast will be an estimate of how much money you think you could bring in and how much you're expecting to spend. It will also act as your “warning system” that alerts you if there are upcoming cash shortages so you can immediately address any shortfalls and come up with a solution.
There are four steps to performing an accurate forecast:
1. Predict how much money you think you’ll earn in a specific period of time (weekly or monthly).
2. Estimate when you will get paid during that time and how much. This is so you'll know if you’ll have enough money to pay for your expenses.
3. Calculate how much money you will spend.
4. Put all the gathered data together and you will get an idea if you're going to be in the red, making ends meet or flush with cash.
2. Provide multiple payment methods to your customers
Late payments are one of the biggest reasons why businesses suffer from poor cash flow. The best way to address this? Make it easier to pay you! When you offer your customers more ways to pay, they will have no reason to be late settling their invoices. There are several payment methods you could incorporate into your business:
- Bank transfer
- Cash on Delivery (C.O.D)
- Payment through credit cards and debit cards
- Payment through direct debit
- Online payments
- Mobile app payments
3. Automate your invoices
By setting up an automatic invoice process you'll also help to keep late payments at bay. Your customers will only pay you once they receive your invoice, so the sooner you send it the sooner you will be paid.
By automating your invoicing, your entire invoice process will be streamlined, as you will be able to generate and send electronic invoices to your customers instantly. Not only will it help you stay on top of your paperwork, it will also cut down your expenses on paper and printing. Automating your invoicing is easy especially with systems like Xero and Ordermentum.
4. Manage your inventory well
Your inventory is one of your business’ biggest expenses and investments, so it’s important that you pay close attention to it. To manage your inventory effectively, make sure you’re reviewing it regularly. Don’t stock too much and always try and reduce your inventory levels by removing products that don’t sell or that you are not using.
It’s also vital that you forecast your retail orders. Estimating how many orders you’ll receive in a month and stocking just enough means you won’t waste money or resources.
Now of course you can do all the above manually but our biggest tip is to invest in a good inventory system. This will help you monitor your stock and review your inventory regularly. Remember investing in smart systems will save you time and money in the long run.
5. List down all your expenses and remove those that you no longer need
The second part of setting up an accurate cash flow forecast is to always keep on top of your expenses and reduce or remove items that no longer serve you. Controlling your expenses can help you have more cash reserves, which you can use to cover unexpected costs or for your future expansion. Here are some of the expenses you can consider reducing for better cash flow:
- Large amounts of stock - Are you holding on to stock that's not selling or past it's useby date?
- Staff - Can you automate some processes that will save you a head count?
- Unnecessary subscriptions - Have you got software subscriptions that you're no longer using?
- IT, HR, payroll, and other admin tasks - Can you outsource these functions to save you time and money?
6. Leveraging technology
There is so much time-saving technology out there these days, you'd be crazy not to take advantage of it. Using software and apps can give you more time to focus on your business critical tasks such as managing your cash flow and growing your business. These tools can also boost your efficiency and provide you with powerful insights that can help you address any issues that may be affecting your business. Some of the best technology tools you can make use of are:
- Accounting software
- Mobile credit card readers
- Ordering and payments platform
- POS systems
- Payroll software
- Inventory systems
Dealing with cash flow problems can be challenging for small-to-medium-sized wholesalers. By implementing clever strategies and following the above checklist you will find that your business will tick along nicely and you'll have peace of mind and cash in the bank.
If you know other effective tactics on how to give cash flow a good boost, feel free to share them in the comments section below. Meanwhile, for more business advice like this, visit our blog.