Every business operates on cash flow. It is the lifeblood of a business. Without cash the business dies. A business with a healthy cash flow is much more enjoyable to run, as well as increases the value of the business and greatly reduces the stress of managing the business. Just like athletes taking the extra steps to improve their results, businesses can review their processes and improve their results. Here are 12 tips to improve your cash flow.
- Invoice and collect at the time of greatest value to the buyer. The buyer’s pain or motivation is usually the greatest at the time they place their order. Arranging for payment on the front end makes it easier for the buyer to part with the money.
- Time is money. The faster the product or service is delivered the greater the chance to create a happy customer and lower your cost to deliver. Follow up on back orders. By dragging out the process, handling costs increase and the opportunity for mistakes to happen increases. The customer’s value diminishes with time.
- Clearly state your invoice terms and due date on the invoice. If you expect to be paid in 15 days – note the actual date you expect payment. This reduces the chances of the customer adjusting the due date – is it 15 days from when you delivered the product? 15 days from the invoice date? 15 days when the customer received the invoice? Or 15 days after the customer decides to pay it?
- Be easy to work with. Have fewer clicks on your website. Provide more options to pay. Clearly state your expectations. I wanted to purchase an iPad. A Google search told me I could get it from Apple or Walmart for the same price. I checked Apple first– however after searching for the order here button and not finding it. I skipped over to Walmart and ordered it.
- Reduce your chance for loss. For special orders, obtain a deposit to cover the cost just in case the order is cancelled.
- Offer the customer different levels of pricing options. Basic, medium and high end. Think – Car wash. When you pull into a car wash they offer 3 options – good, better and best. Most choose middle option – not the cheapest and not the most expensive.
- Increase sales with upsell items. Offer them with current orders or current customers. For example at McDonalds – do you want fries with that?
- Know and review your top 10 customers. Are you meeting all their needs? It is less expensive to sell to a current customer than finding a new customer. Are you contacting them weekly, monthly, quarterly or at least annually? Do they know you care?
- Build recurring sales and payments. Reduce the need to find new sales by selling a service or product that is consumed every month. Then set it up as an automatic monthly payment. Think warranty plan, supply replacement, service, etc.
- Encourage and reward customers to pay early. Add a free or low cost service for those who pay upfront. They get a taste of the other services you can provide and when the year is up – you may have another sale.
- Consider adding a coupon or discount on their next purchase.
- Review what you are offering that is free and of value to the customer. Consider breaking that out and adding it as an option. For example, you provide 24-hour response time for your best customers. You may do it, but does the customer know that and would they be willing to pay for that guarantee.
Every business can improve their cash flow. Profits are necessary to grow and be financially healthy. Customer, competition, economic environment are all changing, thus what worked yesterday may not work as well today. Sometimes just looking at the business from a different perspective provides opportunity.
By Mary Guldan-Lindstrom