In today’s economy, many small and mid-size companies lack sufficient cash reserves to ride out the storm. Finding new customers is tougher than usual. Raising prices isn’t always an option.
Here are a few tips that may help:
1. Manage your receivables. Try to turn your receivables quickly without antagonizing customers. Advise key customers what you’re up against, and arrange more favorable terms. Ask them, ‘What can we do to get me paid more quickly?’ If you can persuade customers to pay quicker you improve your receivable balance. This creates more money.”
2. Manage down inventories. Growth doesn’t always improve revenues. If the business is seasonable make sure inventories do not exceed needs for the current year’s cycle.
3. Ensure new employee hiring is necessary. Employee salaries are a significant cash drain so efforts to maximize productivity from current employees are paramount.
4. Plan ahead. Make sure you forecast financial activity. A plan outlining expected revenues and expenditures is vital to understanding cash needs. You certainly want no surprises on cash flow activity.
5. Go to the clouds. If your business is large enough to have in-house servers, you are aware of the maintenance costs. If business is increasing this may be a cost effective way to create additional capacity without buying expensive new servers.
Business owners should share their cash flow objectives with other key managers to ensure every opportunity to maximize cash savings is realized.