What Can Your Business Do To Improve Cash Flow?

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One of the biggest problems that small businesses face is cash flow. If you don’t get paid on time by a customer or client, for instance, then it can mean late payments to the people that you have to pay, or it can put you out of pocket if you have staff to pay, and so on. So as a small business, having a focus on cash flow is really important as it can solve a lot of problems. So here are some of the main cash flow issues that a small business may face, and some actions that you as management can take to deal with them. It can help in many ways, and get your business on the path to success.

Cut costs

One of the simplest things that you can do to improve cash flow is looking at what costs you can look to reduce or cut completely. All businesses can spot some areas to save, and stop some of the non-essential spending, especially if you are looking hard enough to do so. You may want to move to a smaller office space, for example, as that can be a large overhead costs that can be reduced. You could also look to hire freelancers, rather than full-time staff, because staff are another massive cost to the business.

Rent rather than buy

If you are in business, then you might naturally think that it is worth buying the things that you need. For instance, if you are in a retail business, it could be considered worth buying a warehouse for your inventory, and all of the equipment that goes along with it, whether that be machine haulage or cherry pickers. And if you have enough cash, then it can be a good investment. But if cash flow is a problem, then you need to think about renting instead. The reason being, if you rent, then you only hire and pay for when the equipment is needed. So that can be a really big help for cash flow. 

Reduce the credit period offered to customers

Of course, this is something that is easier said than done. But if you want to improve cash flow, have you considered asking customers to pay for their purchases with a much quicker process? This can be a simple way to accelerate cash flow. Of course, as with anything, there is never any guarantee that customers are going to agree to what you offer. So you could think about offering discounts for early payment, for instance, as a way to encourage people to pay on time. 

Cut stocks

If you want to improve cash flow, then have you looked at reducing the amount of cash that is tied up by things like buying and holding raw materials or goods that you have for resale? This could be anything from ordering in less stock, or by giving discounts on the stock that you have in order to encourage the sale of them to clear them. If these sales are made in cash, then even better to have the money upfront.

The Compromises You May Make In Search Of Business Success

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Everyone knows that success comes with a certain few caveats. For most business leaders, those caveats are worthwhile. This is because what they are doing obviously works, meaning that the daily motivations they have to upkeep their lifestyle are relatively easy to understand. However, not everyone can boast success, especially in the early days. The starting year or two of a business can be an incredibly tough time, and you may have to make certain concessions to achieve it.

This article isn’t in the interest of dissuading you from becoming a business leader. If you’re being proactive enough to read about the downsides of getting started, we’d assume that you’re a very proactive person, hungry for knowledge to better your position. That alone puts you in good stead. However, so will the following practices in the early days. You might get lucky and ignore or completely oppose these points, but for most of us, we have to grapple with the following:

Moving Into A Small Place

When most of your funding is injected into your business, you can be sure that home comforts and utility might fall by the wayside. It could feel like you’re living at your office, or at least your home computer. This means that in general, keeping costs low at home can help you. Of course, this is mostly more achievable and realistic when you haven’t a family, so young business hopefuls take this tip into account!

Another reason for moving into a small place is the proximity to the office it might offer. As a new business owner driving over an hour to your place of work is simply not practical, and chews at least two and a half hours from your daily working schedule each day. Much better to opt for an apartment close to the goings on, and downsizing it to account for the added cost of rent.  Industrial parks and financial districts often have the highest surrounding property price, and this might be a bitter pill you have to swallow for now. Be sure to move all your belongings with grace and care, click here for the best services to do that. From there you can set up your apartment that will also serve as a base of operations.

Free Time

Every business leader works, works and works. You need to replicate this. It should never impede your health or overall mindset, but the concept of free time should be relatively alien to you in the first year or so. This is because 60% of businesses fail in their first two years. In order to avoid this fate it will always be best to ensure that you’re pulling enough hours. This might look different depending on your job role. It could be your profitability is viable at night as well as the day, and so working staggered shifts and sleeping in the evening might help you work in two stretches of time at once. Expect to work sixty, seventy, maybe even eighty hours a week. Where your business is concerned, this time could not be more valuable.

The early days of running a business are hard. With these simply two lifestyle changes, you will be that little more equipped to handle them.