One of the most difficult parts of running a business is managing money. Every organization experiences the pain of being cash strapped at some point in its history. Whether it’s during the start-up phase, slow seasonal months, or increased competition, all businesses must continually keep a close eye on cash flow. Some business owners are quick to borrow when needing an infusion of cash. However, this isn’t always the best answer and with lending still tight, there are fewer options available.
If you’re concerned about your business experiencing constant financial ups-and-downs, you should examine your organization’s cash flow. Start by setting up a budget – daily, weekly or monthly – to track company expenses and revenue. Taking the time to focus on budgeting and cash flow is time well spent. A smart business owner is constantly monitoring cash flow and looking for ways to save cash and increase revenue.
Here are some ideas to think about when managing your company’s cash flow.
- Accounts receivable. Are your customers paying on time? Make sure you don’t allow customer payments to “float” too long. In fact, it might benefit your cash flow to offer a discount of 2 or 3% for customers who pay early.
- New business. It’s usually more cost effective to increase existing customer business than to attract new customers. However, many industries experience turnover in their customer base which requires them to always be looking for new business. In that case, maximize referrals, marketing, and promotion to help new customers find you.
- Reduce expenses. Administrative costs should be the first place to look for cutting expenses. Is there a more cost-effective alternative to providing the basic operations of your company? Find new vendors or share expenses with another business.
Another way, often overlooked by financial experts, to conserve cash is to add barter to your payment system. By using a reputable business-to-business (B2B) trade exchange, you can pay for company expenses in barter dollars instead of cash. For example, a restaurant needs a new sign but the sign company needs a legal contract. By using a digital barter network of round robin trading, each business gets what they need and doesn’t have any outlay of cash. The Barter Company can answer any questions you have about adding barter to your payment system.
For more information about managing cash flow, check out this blog post from the Small Business Administration: https://www.sba.gov/blogs/managing-small-business-cash-flow-answers-10-commonly-asked-questions