With so many funds going out of a business bank account to pay for procurement and other costs, it is easy (and very common) for organizations to often struggle with cash flow as a result. However, cash flow is the life blood of all ventures, and needs to be kept track of closely if a business is to steer clear of financial woes, staff layoffs and even closure. If you need to find ways to get your organization’s cash levels more even, read on for some tips you can follow today.
Track Cash Flow Closely
The first step to take if you want to get on top of cash flow is to consistently track it. You should keep a close eye on the current financial position of your department or organization, and be very clear on the regular deposits and expenses that come in and out each week or month.
When you take the time to examine how and when most income is received and costs incurred, you have more chance to plan effectively and to stop yourself from being unexpectedly caught without enough funds on hand to pay for bills.
It is especially important to track cash flow closely when the company is growing. While growth is, of course, a fantastic thing, it can tend to cause issues if the costs involved in the expansion (such as the purchase of additional inventory or addition of new staff) outweigh the additional sales being made.
Better Manage Inventory Levels
Another element of getting cash flow back on track is better managing your inventory levels. If your organization is like so many others, you probably end up having too many funds tied up in slow-moving or dead inventory that is just gathering dust in a warehouse.
To increase cash flow, you need to continually analyze the items you purchase to work out what the bestselling things are, and what just doesn’t seem to be performing. Don’t leave it to a yearly inventory review or quarterly reports — you should be examining things on a weekly basis wherever possible.
The “bread and butter” items you use or sell need to be kept on hand in decent quantities, but everything else should be limited to smaller amounts. If you have lots of older, outdated, or unpopular/unnecessary products, it is time to find ways to keep them moving out the door. Selling them will bring in some extra cash, for starters, plus it will also free up room for the more popular items.
It is wise to look at ways to improve your forecasting methods too, so that you don’t buy too many things too soon, or run out of the most popular items and then need to pay more to get them shipped in quickly (or lose out on sales because they’re out of stock).
You should also look for ways to pre-sell goods wherever possible, particularly if you want to bring on new lines. By offering goods for sale before you have them in stock you will keep your cash moving better and also ensure that you don’t get stuck with unwanted goods.
Renegotiate With Suppliers for More Favorable Terms
Next, keep in mind that the terms you currently receive from your various suppliers do not need to be fixed. To free up some cash flow now and into the future, it is worthwhile speaking to each company you purchase from to see what kind of better payment rates and conditions you can negotiate.
As an example, you might find that you can arrange longer payment terms (e.g., increase from seven or 14 days bills to 30 days or longer), or be able to receive faster, discounted, or even free shipping on your orders. As well, consider trying to negotiate discounts or bonuses when you buy over a set amount of goods, or certain value, during a set period of time.
It is also beneficial to negotiate with vendors on the return of items you buy. If you are able to send back products which don’t sell within a set period of time, you won’t end up stuck with things and will free up cash flow as a result.
Get Access to Additional Funds
Lastly, keep in mind that sometimes cash flow is simply tight because you’re buying more at a busy time of year, or need funds to pay for new machinery, additional workers, extra advertising, or to move to a bigger warehouse or attend a key event that will generate extra sales. If this is the case, it may be time to source additional funds to cover cash flow for the short term.
There are numerous places you can turn to for the extra resources. For example, you might want to source an affordable business line of credit, or contact your bank for a loan. Other options include invoice factoring, supply-chain finance, epayables, crowdsourcing, seeking an investor or partner, or getting funds from family members or friends.
If you want to access extra cash, it is important that you research the various options and figure out which will suit your needs best. Completing your due diligence beforehand will help you to stave off potential headaches in the future.