How to Improve Cash Flow -Business Owners[Video]
by Financial Design Studio, Inc. / October 26, 2020
In our recent video series dedicated to small business owners, we have talked through some common financial statements like the Balance Sheet and the Income Statement also known as the P&L. Now we are going to talk through a Cash Flow Statement which highlights the inflows and outflows of cash. And for every business owner, cash is life! It’s what keeps the business going. Let’s see different ways of how to improve cash flow in your business.
How to Improve Cash Flow
You can have sales, but if you don’t have cash off those sales, meaning you have too many expenses, then you will not be able to succeed or keep going. So let’s look at ways we can increase the cash flow!
How do we increase sales? How can we sell more of the same thing or maybe more of a new thing? This could mean we’re looking for new services or products to offer or maybe even thinking of entirely new revenue streams.
It also requires thinking through your target market. It may mean selling to someone I haven’t sold to before or turning something that wasn’t profitable in the past and was dropped into something being offered again.
Another way to increase cash flow is to collect on accounts receivable. These are sales that you have already made in the past but have not yet received payment for. If these outstanding payments are getting to 30, 60 or 90 days out, you need to collect soon or else you may not collect at all. Large and old accounts receivables are not good.
This is an exercise where you go through your chart of accounts and analyze what expenses you currently have and try to determine if you can operate more efficiently. What subscriptions or memberships have you signed up for that you are not utilizing anymore? What equipment have you bought that you really don’t need and can sell? Sometimes you can increase cash flow by decreasing expenses.
Customer service is often the secret to sales and repeat sales. How do we keep customer feedback really high? It’s usually by determining what you’re doing well now and continuing to do those things over and over. It can also mean finding ways to tag or like more of your social media posts to increase visibility to new customers and markets.
Throughout the life of your business, there may be times when things get financially tight. Therefore, it is really important to set up an emergency fund now to save extra cash in anticipation so that your savings can help get you through in those times.
It’s like the old saying about turning lemons into lemonade or bad times into good times. Look at what you have and cut where you need to. This is one way to keep the business going by finding excess cash where you already have it.
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