Cash flow is the foundation of all businesses; no two ways about that. Despite this fact, few companies take the matter as seriously as it deserves. In fact, 82% of US businesses crumble because of cash flow issues, while Australian businesses reported cash flow as the number issue affecting their companies. A regrettable – yet often avoidable – misstep when it comes to business expenses and expense management.
The reason for the prevalence of cash flow calamities is that instead of focusing on expense management solutions, expense reporting tools, or strategies for managing finances accordingly, numerous business leaders simply pour their energy into other areas of a brand; after all, this is likely why they got into business in the first place.
But while landing new accounts might be a thrill, building a profitable brand through billing in a timely fashion and collecting past-due cash is often neglected as it is far less electrifying. This can frequently result in clients paying 60 – 120 days late, thereby negatively impacting business operations.
When accounts receivable start to peak, your brand might look great on paper, but you could be manning a sinking ship as money goes out the door faster than inflows in; rent payments, staffing costs, new inventory, and equipment are all expenditures you must continually consider, irrespective of your revenue levels.
If your brand seeks to remedy its cash flow woes and needs some practical advice on how to bolster its available means, look no further. Here are 4 tips on how to grow your cash flow.
By incorporating expense manager solutions in your business you are leveraging employee expense report software to its fullest while saving yourself, the company and employees time and money.
1. Cut business costs
The first step in bolstering your cash flow is to cut current expenses that aren’t serving your organization.
There are various opportunities presented through this approach. However, many of these tend to be unique to your specific business. Some of the more universal reductions include:
- Ensuring suppliers are not double or overcharging
- Identifying alternative options to high-priced suppliers or negotiating better rates
- Eliminating organizational inefficiencies
Disorganization and inefficiency are one of the more prominent areas to focus your efforts on. Many companies that seek to increase their cash flow believe that manually handling certain tasks will help drive down costs through not deploying a software solution (another expense).
This is counterproductive and costly as the organization is exhausting increased resources to handle the same tasks that an automated tool could handle more effectively, in a fraction of the time.
Instead of having numerous employees managing potentially hundreds of invoices per month, employ expense management software to automate invoice processing; this will reduce errors, save time, and drastically increase productivity.
Additionally, utilizing a customer relationship management (CRM) platform makes communicating with clients much simpler and more personal as this type of database keeps all of a customer’s information and contact history in a single, intuitive location. This not only reduces inaccuracies and improves relationships with current clients, but it also houses information on new prospects and reveals emerging opportunities by studying customer actions while evaluating agent performance rates.
On top of these expense cutting strategies, your company may also want to consider the monetary benefits of going paperless as businesses across the U.S. spend more than $120 billion per year on printing documents.
These are just a few of the methods you can employ to increase your cash flow. Through poring over your expense history, you should be able to establish several other areas of overspending.
The next step is understanding where you are and where you are headed. Too frequently organizations are ill-equipped to handle the expenditures that come with expansion. Increased sales might demand more workers and higher levels of inventory, and those come at a cost.
To effectively assess the landscape you will want to create a cash flow projection. (This checklist may also help.) You should generate a 12-month forecast to gain an understanding of the big picture; however, you’ll also need a week-by-week projection to know when and where to expect expense spikes, such as those times when several payments are due simultaneously.
To properly map your brand’s forecast projections, it’s wise to employ certain expense tracking such as an expenses app that features employee expense software, business expense software, digital receipts and online receipt management, and other useful elements such as a mileage tracking app. All these elements and factors are critical, but we’ll get back to that in a moment.
For now, the important thing to remember is that you need to develop a clear and accurate forecast on the micro and macro levels.
3. Craft a cash flow management strategy
An effective cash flow strategy is arguably your most powerful tool; and within that tool, clarity is your greatest ally. To obtain transparency, you need to be brutally honest about the following questions:
- What has made us successful in the past?
- What are the greatest skills that we offer?
- What has been responsible for our current success(es)?
- Which are our best products and/or services?
By honestly assessing these dimensions of your business, you can increase your cash flow by cutting dead weight and refining your best elements.
Additionally, while tracking the in-and-out flow of cash throughout the month can be a time-intensive task for busy business owners, you can lighten your load by deploying a mobile expense management software like Webexpenses.
Utilizing business expense tracking software services like Webexpenses enables a business owner to gain a birds-eye-view through pragmatic tools like online receipt management, employee expense management, various expense reporting tools, digital receipts stored in a single location, integration with other accounting services, an expense, and mileage tracking app, and many other robust features.
With this sort of business expense tracking software, you can gain a more fundamental understanding of your business’s month-to-month cash flow; this is vital as things can fluctuate wildly due to various overheads, sales slumps, etc. In the digital age, there’s no reason not to take advantage of expense tools or expense report apps that simplify and streamline processes.
And given the nature of today’s hurried and ever-more remote work settings, having a mobile expense management software will help you ensure that your cash flow is in a healthy state, even when you are away from your desk.
4: Implement incentives for early payments
Invoicing can be a headache for many businesses, sometimes resulting in late payments and back and forth emails.
If you find it challenging to hold clients accountable, try implementing an enticement and penalty plan.
By supplying discounts for early payment and tacking on interest for past-due fees, you can effectively encourage clients to pay their bills early, thereby enhancing your cash flow. However, this doesn’t only improve your business’s invoicing practices; it also reduces the time and resources spent tracking down delinquent accounts.
When providing an incentive to clients, a 1–2% discount on the bill total (given that they pay within a certain number of days) is normally a good rule of thumb. Additionally, you can automate this process with a good business expense software.
Seize the opportunity to build a profitable and long-lasting business by enacting these essential practices today.