Managing cash flow is very important for any company, including a small business. Here are some strategies you may want to consider. Income — Take a good look at your income streams. Are your revenues diversified in terms of products and services you offer or in terms of the number/types of customers? […]
Managing cash flow is very important for any company, including a small business. Here are some strategies you may want to consider.
Income — Take a good look at your income streams. Are your revenues diversified in terms of products and services you offer or in terms of the number/types of customers? Do they come from more than one source? Are you a seasonal business? What is your most profitable product or service? Perhaps promote that product or service more. Have you lost a contract? If so, did you inquire about why it was lost? Is there something you can change to ensure you won’t lose more contracts? How do you plan to replace that income?
When is the last time you looked at your pricing? Are you charging enough to cover all of your costs — both direct and indirect? Are your competitors selling at about the same price? Remember perception — if your pricing is a lot lower than your competitors, the perception is your quality or customer service is not as good. If you are charging a lot more, the perception is you must be a lot better or have something really unique.
Deposits — Require deposits from your customers if possible. If you are a contractor, require 25 percent or 50 percent before you start the job to pay for labor and materials. In retail — if a customer places a special order or custom order — require a deposit or full payment before you process the order with your supplier. If you have secured a contract for a large job — require periodic payments.
Accounts receivable — Another result of tough economic times is customers are taking longer to pay their bills. It is not unusual to see receivables being collected in 90 to 120 days when it used to be 30 to 60 days. So it is becoming more important that you stay on top of your receivables by making calls when they are a day late. Ask if the paperwork has been processed and ask when the check will be mailed. If it has not, request a date it will be, and if you have not received it by then, call again. Also, request a credit-card number to be on file with the understanding and agreement you will process payment if not paid. If the customer does not pay within the specified time frame, charge the client’s card. It is very time-consuming, but essential for the health of your company.
Another strategy is to offer a discount if the bill is paid within 30 days — perhaps a 5 percent to 10 percent discount. This may be a big enough incentive to move you to the top of the list of the customer’s payables.
Telephone — Take a look at your bills — are you using all of the minutes you are paying for? Have you reduced your staff and now don’t need as many phones, but you are still paying on them every month? Does every employee really need a phone? Is there a better plan to meet your needs? This should be analyzed every year.
Utilities/energy usage — Keep a close eye on your energy consumption. Set your thermostats to a lower temperature, turn off all appliances when they’re not in use and encourage staff to shut down their computers when they’re out of the office. Take a look at the hours you are open and the customer traffic. Is it feasible to close an hour early on Mondays and Tuesdays without hurting the business? It could also help with reducing payroll costs.
Insurance — When is the last time you contacted other insurance agencies to see if your current policies are competitively priced?
Promotions & advertising — Every business should be continually working to increase customers/sales. There are many ways to promote your business without spending a lot of money.
Do you ask your new customers how they heard about your business? You always want to know where you are getting the most benefit from your advertising budget.
Increase your social and professional networks to promote your business. Make use of chambers of commerce, women’s networking groups, green business groups, Toastmaster, tip clubs, etc. Don’t be afraid to talk about your business with everyone you meet. Always have a business card with you. Statistics show someone must see or hear a name seven to 10 times before it makes an impression.
Conduct educational workshops (in person and online) to highlight your expertise, write articles for the newspaper or magazines to show your expertise, or supply information to bloggers in your area of expertise.
Internet strategies — A business has many low to reasonable cost options to promote itself online. Do you have a website? If so, are you getting visitors? Or sales? Is your website easy to navigate? Is there a “contact” page with an email address? Many businesses would benefit from a three to four page website for the purpose of information/education to the customer, credibility, and exposure.
Use social media: Set up a Facebook page. Use Twitter. Write a blog.
In summary, look at all ways to increase income and see which are viable. Take a look at all of your expenses and scrutinize them to see if any can be reduced or eliminated without affecting the business’s reputation or performance.
The Small Business Development Center (SBDC) at Onondaga Community College works with a range of businesses — from home-based, to e-commerce to large manufacturing firms — providing information relevant to making well-informed business decisions. Contact the SBDC by email at sbdc@sunyocc.edu or by phone at (315) 498-6070.