As an entrepreneur, one of the key factors that keep a business running is liquid cash or operating capital. When a business has cash flow it will always be in a position to pay suppliers, meet payroll and pay for other expenses.
However, many owners go without cash inflow into the business. The main reason why businesses get into this position is due to a lack of ways to conserve cash.
Conserving cash is not always easy. If you think so, then tell us why many entrepreneurs fail? Can a business increase cash flow and maximize profits at the same time? Yes, here are key steps for doing so.
1. Spend wisely
Make sure that purchases are made for need to have not nice to have items. Items should have a good use in the business producing revenue where possible.
2. Hire only when necessary
Employee salaries are a significant cash drain so efforts to maximize productivity from current employees are paramount.
3. Lease equipment or buy used
Leasing vs buying can be an important option since equipment purchasing can be a serious cash drain. If an option exists to buy gently used equipment it may be a profitable option.
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. Renegotiate leases
Rent is often a sizeable fixed cost that can be negotiated. Speak with your landlord; there may be an opportunity to downsize or even temporarily obtain rent reductions. Landlords often prefer to accept lower income than losing tenants.
6. 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.
7. Exchange Goods and Services
Look for vendors who are also in need of certain products and supply the products to them in exchange of products that you lack to run your business smoothly. By exchanging products for other products( barter trade), it means that you will be able to conserve cash in the business.
Business owners should share their cash flow objectives with other key managers to ensure every opportunity to maximize cash savings is realized.
I hope there few ideas provide new thoughts on ways to improve profits for your business. Let me know what you think. Gerry@polarisgroupmc.com