There are basically only two ways to increase cash flow: increase the amount of money coming in and decrease the amount going out.
Increase income
1. Increase sales. If cash flow is very tight, you could offer a sale or discount on your services. Create a new line of product or service.
2. Raise prices. Increase your rates, as the cost of goods and services are going up, you need to keep your profit margins stable.
3. Go get what people owe you. The longer you wait to collect, the less likely it becomes that you’ll collect the full amount owed. Call on overdue customers and employ all lawful collection activities at your disposal, including phone calls, letters, collection agencies, and even small claims court.
4. Update credit policies so that customers/clients pay with a retainer. Factor in the cost of merchant fees to accept credit or debit cards, or electronic payments, such as PayPal. I like to provide cash discounts.
6. Borrow money rather than laying out cash. If you lack the cash on hand to acquire the items you need, consider charging the purchase or borrowing the money. For example, if you need three new computers, you can put the purchase on a company credit card and pay off the purchase over several months.
5. Maximize investment returns on the company’s retained earnings. If your company has been socking away profits for a rainy day, make that savings work for you. Discuss your investment options with an investment advisor.
Decrease outflow
7. Trim expenses. Review your monthly expenses to determine where cuts can be made. You may be able to save on telecommunications by changing providers or phone plans. Think about cutting those expenses that aren’t “necessary”.
8. Reduce inventory. Have a sale. Make sure you plan out your purchases of inventory, analyzing the rate of turnover. It costs money to stock inventory, so limit the amount you maintain.
9. Use barter to acquire the goods and services you need. While bartering restricts the cash going out, the goods and services you use in the trade also means that less cash is coming in. Thus, as a rule of thumb, limit bartering to 5% to 15% of total revenue to maintain good cash flow.
10. Delay bill payment to the extent possible without incurring any late payment penalties or fees.
11. Restrict payments to yourself. If self-employed, reduce your draw when cash flow is tight. If you’re salaried, you can loan back some or all of the paycheck to your corporation. Be sure to treat the transaction as a loan so that repayment to you in the future will not be taxable.
12. Restructure loans to reduce interest costs. In today’s low-interest environment, it may be possible to significantly cut your monthly interest costs on your business-related borrowing.
Resources – Barbara Weltman Shared from her article! We love Barbara, check out her website. www.barbaraweltman.com
