What I want for Christmas is… better cash flow!
When you sit down this year as a business owner and wish for a great Christmas present what will it be? At this time of year, most businesses wish for more cash flow.
Alec Blacklaw, our Business Improvement Director, shares a number of things you can do to improve the amount of cash you have or could have.
Do you really understand the drivers of your cash flow? This is different for many businesses depending on their business model or the particular phase of business maturity.
Think of what you can do to get paid up front for a part or all of your service or product before you have to pay for core inputs whether that’s material, the product or wages and super. What might you need to do differently to get the timing of the cash flow swinging in your favour?
Don’t follow the pack or what others in your industry or segment do. Think of what you can do to tilt the cash flow into your favour. What might you be able to do? Perhaps you can offer a discount, loads of value, or add a further product or service with real or perceived value at the point of purchase to bring your cash flow forward.
Think of what makes your product or service special or worthy or prompt payment for part or all of it. If you can’t think of much you do need to think again of where the real value lies for the customer. I suggest you get your team involved in this brainstorm. In fact, you can have these candid conversations with you clients too depending on what they are buying from you. Try it.
On the other hand, if you are paying for the product up front, or the raw inputs, or building up work in progress, consider what can you do “timing wise” to defer the payment of some of these expenses? Can your labour cost payment be moved to coincide with the cash inflow? If so what conversations do you need to have? Or what benefit might there be for your employees or suppliers to bend with you?
Make it easy for your customers to do business with you and to pay you- it’s amazing that some clients tell us that they would pay their bills early if only they were followed up, or if they had more options to pay including online or where they would pay earlier if they were offered a discount (doesn’t need to be large!) . In fact, some businesses have a policy that they must take a discount if it is offered – one your conditions is they pay you up front for all or part of your product or service.
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