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Your business will quickly come to a halt if your run out of cash so it’s important to understand the drivers of positive cash flow and the friction points in your business processes that might slow or even prevent it from reaching your bank account. Many profitable businesses have hit the wall simply because they’ve mismanaged their cash flow. Whilst sales drives revenue, revenue alone will not drive positive cash flow. Here are six cashflow strategies that will.

1.      Stop discounting. The level of your gross profit margin is fundamental to positive cash flow so it’s vital that you monitor it constantly and resist giving it away by constantly discounting to win business. Discounting is lazy marketing. Instead, get to know your customers and understand what further problems you could solve in relation to your products or service. Examine the pain points that your customers have when buying from you and eliminate what you sensibly and profitably can. This is adding value to the customer experience and makes your offering more valuable and compelling.

• Require a deposit before booking work or placing special orders. Provide the option for customers to pay 100% upfront. Some are happy to do this. The e-commerce revolution is conditioning customers to pay upfront so leverage this phenomenon for your own business.
• Offer 7-day accounts in place of 30-day accounts
• For regular routine billings of the same value use automated direct debit service providers as standard practice
• Consider fixed price service agreements and collect as above. Customers value predictability.
• Issue invoices immediately without delay
• Send payment reminders the day before the due date, and after the due date with an increasing tone of urgency.
• Aggressively manage and optimise work-in-progress (WIP) to shorten the job cycle.

3.      For businesses carrying stock for reselling or manufacturing stock control is key. Without a disciplined and systematic approach to optimally managing stock, your profits will end up gathering dust on shelves as unsaleable stock and/or sales will go begging because you are repeatedly running out of something else. Monitor and identify slow-moving items, set and monitor re-order quantities, rotate stock to minimise spoilage, and merchandise merchandise merchandise to increase customer engagement. Remember retail is show business.

4.      Review fixed expenses regularly and ask your suppliers for better pricing and longer terms. Eliminate unnecessary subscriptions and conduct an ROI analysis on your marketing spend to establish what marketing is working and what’s not.

5.      Pay annual expenses monthly where possible. There might be savings on offer paying annually but weigh up how much it may cost you in the long run being without the cash. If an annual payment leaves you too short, you may end up paying late penalties/interest elsewhere or missing out on a lucrative sales/buying opportunity for lack of cash. For me, it would have to be pretty compelling saving like 7 or 8 percent plus to entice me to pay annually.

6.      Measure to eliminate waste. Waste is an insidious cost to business. It’s insidious because, at any one point in time, it can appear negligible. But just like a dripping tap the cumulative effect adds up throughout the year. Beware, particularly of excessive supplies of consumables on hand. Bulk buying deals are attractive but the savings can easily be offset by wasteful use, theft, and spoilage. Human nature devalues that which is in plentiful supply.