Buying in bulk, expanding your market, locking in prices, and requesting payment in installments are just some of the ways to improve cash flow. All of these ideas can help you grow your business without draining your bank account.
Creating a cash flow forecast
Creating a cash flow forecast to improve cash flow is a helpful tool for any business. It can help you plan your business’ financing and keep track of regular business expenditures. This is also a good way to assess your repayment goals and evaluate your progress.
Cash inflows include anticipated sales revenue, interest earned, and vendor expenses. Other cash inflows can include government money (tax money), receivables collections, and dividend income.
The payables side of the equation should anticipate annual and quarterly bills. Keeping a strict credit period can help your business avoid negative cash flow. In addition, your business needs a healthy working capital to cover its expenses. A company that is operating with too little working capital may not be able to support new operations.
Buying in large quantities
Buying in large quantities is a great way to lower the cost of producing goods, but it can also tie up cash in inventory and leave you short on time and capital to expand. Getting rid of excess stock or leasing equipment instead of buying it might be the best way to keep cash flowing. This is especially true if you’re a start-up business or a small business.
Choosing the right inventory to begin with is critical. Too much of anything can be a recipe for disaster. In addition, choosing the wrong products can be a costly mistake. The good news is that there is a wide array of products and services out there to suit any business’s needs. Using the right mix of products and services can improve your cash flow.
Locking in prices
Having a lock on your electricity rates can actually reduce your utility bills. As well as making your life easier, it will likely save you money over the long term. Some companies are even using a lock to offset inflation in their area.
The question is how do you make the best use of the rate information? Some businesses are even opting for a shared warehouse. The trick is to make sure you’re not only getting the best rates available, but also using the right company to lock in these rates. You can’t expect to lock in rates that are a couple of years old, though. The other consideration is determining what to do with the money that you’ve secured. This could involve putting it in a savings account, a loan, or some other arrangement.