Cash is the oxygen your business needs to survive. For your business to survive and recover from the current economic downturn, its essential that you maximise your available cash. Here are 5 steps you can take right now to improve your business cash flow:
1. Accessing government support
The Federal and Queensland State Governments have announced a range of initiatives to support businesses through this period including several to assist cash flow. If you haven’t already done so, you should ensure that you apply for any assistance your business is eligible to receive. For the latest information on measures announced by the Federal Government click here and for Queensland Government initiatives, click here.
2. Collecting cash faster from your customers
Now’s the time to review your accounts receivable process and look for strategies to minimise your debtor days (the number of days, on average, it takes your customers to pay you). Options include tightening and enforcing your Terms of Trade, engaging a debt collector, interim or staged invoicing, asking for deposits, offering prompt payment discounts and streamlining your billing process.
Triage your customers and offer options for those severely impacted. A change of approach is needed; empathy and flexibility now will pay off later. For more ideas check out our article Requesting payment of overdue accounts in a crisis.
3. Negotiating better payment terms with your suppliers
Review the terms you have with your suppliers and identify potential areas of improvement, e.g. asking for prompt payment discounts, better pricing, consignment stock and spreading payments across a longer term.
4. Boosting sales
If your business is still trading, consider how you can maximise sales levels over this period to improve cashflow. Focus on the 5 ways to grow sales and determine which areas will give you the greatest return:
- Increasing customer retention: Steps to stop your customers switching to your competitors.
- Increasing leads or enquiries: Ramping up your marketing to your target market, using cost-effective marketing channels that work in your industry.
- Improving sales conversion rates: Focus on the benefits you offer and the problems your business solves for your customers.
- Increasing transaction frequency: Ensuring you have a follow up process for your next sale.
- Increasing transaction value: Upsell to existing customers by offering them additional value. For more ideas check out our article How to upsell and cross-sell in retail.
5. Improving your profit margins
Improve your profit margins by:
- Reviewing your processes to reduce re-work, errors and wastage.
- Monitoring team productivity to identify areas for improvement.
- Reviewing the margins you’re achieving from different products or services. Focusing on products or services that have a better margin and reducing or discontinuing products or services with a lower margin may contribute to your business survival.
When used consistently with a regularly updated 13-week cash flow forecast, these measures should significantly assist in improving your business’s cash flow position helping it to survive the current period of uncertainty.
To help you manage and forecast your cash flow, we’ve created a cash flow forecast template which you can download from our toolkit.
Need a hand with your cash flow forecast or improving your cash flow? Book a complimentary meeting to discuss how we can support you.