Sometimes, it seems we’re moving too fast in the day-to-day demands of our business to actually consider whether we’re actually making money. But, inevitably, cash flow challenges will rear their ugly head, and we may find ourselves in an unanticipated bind.
One clear sign of a cash flow issue is if you find yourself juggling payment of your own bills waiting for additional funds from your business. Another is if you find your cash influx is dwindling. Or not even being aware of your cash flow situation can spell certain trouble ahead.
Regardless of what’s brought you here, we have some ways you can alleviate the pressure of cash flow challenges.
Examine Your Invoice Practices. How quickly are you invoicing? What payment terms do you offer? If your invoicing is lagging your deliverables, tightening up your invoicing protocols will help. If your payment terms are too long, consider shortening them or offering a modest discount for earlier payment.
Reduce Expenses. Every budget has some room for cuts. Instead of looking at your major expenses such as inventory or staffing, look for the low-hanging fruit of non-essential expenses or “nice to have” items. Auditing your overhead costs, including rent and utilities, can also help. If you’re coming up for a lease renewal, this may be the perfect time to renegotiate your terms.
Look at Your Pricing. If it’s been years since you’ve raised your pricing, it’s time to reevaluate your full cost of delivering goods or services. If you do find you are charging too little, the damage to your bottom line will only persist and worsen. Rolling out a modest increase while stressing the quality of your product and service will likely be understood and accepted by your loyal customers.
Build a Cash Flow Forecast. Profit and loss statements are great for looking back, but not so effective for gauging what funds you have on hand or will have in the future. Building a periodic cash flow forecast, either by the month or the quarter, will help you anticipate any potential shortfalls as well as assist you in making longer term business decisions.
As full-service bookkeeping and accounting specialists, we can work with you to keep you on top of their cash flow and finances. Give us a call to see how we can help.