About half of SMBs say they are seriously worried about cash flow, and 30% are impacted 3-4 times a year (or about once per quarter) by cash flow issues. Preventative maintenance is crucial for averting a cash flow crisis. These five steps will help you work ahead to stay out of the red:
Incentivize early payments - An early pay discount is a great strategy to get payment upfront versus waiting for a Net 30 or 60 to come through. You can offer a similar discount for clients who put you on retainer.
Review your expenses and cut as many as possible - Meals, nonessential office supplies, and travel expenses are top costs to cut. Work-related car use is also a big one right now with gas prices surging, especially in California. Moving to a remote work model can also save tens of thousands of dollars each year.
Conduct a cash flow analysis -This will help you determine your company's working capital, or the amount of money available to run your business and complete transactions (psst – this is something we can help you with!)
Analyze your processes and procedures - We love our employees and want to create a healthy workplace culture, but we must also analyze processes and procedures. Are your employees working at their most efficient? What’s preventing them from doing so? Time-wasting activities like surfing the Internet (outside of the occasional mental palette cleanse) and socializing with co-workers are big culprits.
Forecast as much as possible - Be proactive in planning future expenses. For example, save for taxes each month based on last year’s projection and plan for monthly payroll payments based on your employees’ set hours.
Each of these cash flow strategies is part of the Profit First Method, a wildly successful model that flips the traditional profit formula on its head. SMG Business Services is a Profit First-certified financial services organization ready to help you crush cash flow management. Get in touch with us today!