As the owner of any small business, you can often find yourself running into cash flow problems, it’s a common experience. There could be many reasons for this. The cost of supplies, inventory or business operations can outweigh the money coming into the business. Without proper management of cash, your business could land in hot water. So what can you do to get back to the cash flow positive and stay there? There are many ways that you can remedy the situation. A careful look at your budget and some financial planning will help pinpoint where you can implement change or curb expenditure to improve cash flow.
Here are a few examples to think about:
Find ways of bringing in new business and retaining existing customers
The first step is to make sure you’re marketing your business to the right people in the right way. You might need to rethink your marketing plan or start marketing if that hasn’t been on your agenda. Maybe it’s worthwhile to run some specials or promotions to draw in more customers. There are various ways you can market your business. You can take the traditional route and market through radio and television, but it is generally more cost-effective to market digitally. Whichever platform you choose, be sure that your message is targeted towards your customer base.
Secondly, don’t forget about existing customers. Take advantage of those relationships, and turn them into brand advocates who keep coming back. Their experience at every touch point will influence whether they turn into repeat customers. One great tip is to engage with customers on social media – respond to comments timeously and share content with them that is engaging and valuable. Go the extra mile to answer their questions and address their concerns – especially when it relates to your business or industry, this can help build trust and encourage customer loyalty. Warm service will show customers that you have their best interests at heart and they will be more likely to support your business in the future.
Compare quotes and build relationships with trustworthy suppliers
One thing that you should be doing is forming valuable relationships with your suppliers. Building a solid relationship with suppliers will put you in a better position to negotiate with them – this means they are more likely to offer you discounts and special deals. Over time, and as your relationships with your suppliers grow, you could find more benefits like this opening up because of your longstanding relationship and the fact that you are bringing in business for them. For example, because you’ve built a good relationship and the supplier knows you are a trustworthy client there may be opportunities for discounts or more flexibility in extending your credit. Instead of having just two weeks to pay a supplier you could push for four weeks. And because the supplier knows you’re good for it, they might be willing to accommodate.
It’s also a good idea to compare quotes from different suppliers, especially if you’re looking to launch a new range of items to add to your product line. This might require extra time and effort, but in the long run, it may save you some money. Just be sure not to compromise when it comes to quality. This, along with customer satisfaction is the lifeblood of your business.
Assess where you can save in the day-to-day running of the business
We spend a big chunk of our lives at the office, so it’s understandable that we want to make it a comfortable environment for ourselves and our employees. But are you spending more on luxuries than you need to? Do you really need that fancy espresso machine or trendy office furniture? Consider what are needs and what are wants. If you find there is extra money for the luxuries then go ahead, but if you’re looking for ways to save and you know things are tight, rather spend money on what the business needs to operate efficiently.
This can even apply to the software that you need for business operations. Determine whether a subscription-based offering is reasonable and includes the features you need. For example, SAGE offers their basic One Accounting software for R2214 per year which includes invoicing, calculating VAT returns, and connecting your bank. While SAGE is a well-known accounting software used by many businesses don’t be afraid to consider the free software that is on offer and determine whether this would work just as well for your business. GnuCash is a free software tool that handles invoicing and credit notes, accounts payable and receivable, employee expenses and some payroll features too. While GnuCash will save you some money, the question you need to always ask yourself is if this is suitable for your business. It could be worthwhile to make a list of potential software options for your business and jot down the pros and cons of each one before deciding. By doing so you can factor in the cost and weigh this up against the features and benefits of how this can service your business.
There are a couple of ways you can save money by being an environmentally conscious business. Why not go electronic, whether this is for emails, invoices or bookkeeping, instead of using reams of paper? If your business is paper-heavy consider recycling. This doesn’t just save you money but can also bring in money by having items recycled by organisations like Sappi’s recycling agents. Use energy-saving bulbs and unplug devices when not in use. Or, with the current water shortage in South Africa, encourage your employees to use water conservatively and fix any leaking taps as soon as you become aware of them. You may think these small changes do not make a big difference in your bottom line, but consider this: Brian Wilkinson, CEO of the Green Building Council of South Africa (GBCSA), says a green building on average saves 25% of electricity. These energy-efficient solutions may also help you qualify for tax incentives too. The incentive works on the basis of quantifiable energy that you save expressed as kilowatt-hours (kWh). For each kWh that you save, you will get a 45-cent tax relief.
Use your office space wisely
Office space can be very pricey – especially if you want a prime spot that’s accessible to a large customer base. If you’re renting a big office space but you only have a few employees, consider sharing your office space with another business. Make sure that the space you rent is suitable for a small business and that subleasing doesn’t go against your own lease agreement. Alternatively, a shared workspace will save you a substantial amount on utilities as well. For example, The Bureaux Flexible Work Habitats offer a desk space for R1,850 per month and it includes necessities like electricity, water, and a Wi-Fi connection. This is a great option if you run a business that’s flexible like a digital marketing agency. More and more people are working remotely these days and because most businesses have gone digital this is becoming more widely practiced as it lowers overheads. Of course, this isn’t ideal for all businesses. If you’re in the restaurant or offline retail industry you need a storefront. Renting or buying property can be expensive so it is important to understand what your business needs so that you aren’t wasting money on a few extra square meters that you aren’t actually taking advantage of.
Invoice customers as quickly as possible
As a business, you want your clients to pay you as soon as possible. In order to get paid quickly, be sure to invoice them immediately after the service/product has been provided. When it comes to services offered by electricians, plumbers and other similar trades a good strategy would be to offer discounts as an incentive for paying early – if you can afford to do so. While giving a discount may tighten margins slightly, it will also manage to free up cash flow in your business. In the past, businesses generally used to give 30 days for a client to pay, but this is starting to change. Xero conducted a study which found that 70 -80% per cent of businesses give 2 weeks or less to pay, and more than half of those requesting payment within 7 days. Be sure to mention the payment deadlines in your service agreement to avoid unnecessary misunderstandings.
Don’t wait until your business is experiencing a cash flow slump. Make sure that you have documented a plan and have a cost-reduction strategy in place so that when the leaner months come you know exactly what to do to help your business. Every business is bound to experience a bump in the road, but the true mark of a successful business is having a strategy and managing cash flow to help overcome this. Every hour a business owner spends worrying about cost reduction is an hour they could be spending focusing on the business. Don’t shy away from spending money where needed, but don’t be afraid to eliminate costs in areas where it is not.
Short-term business funding is also a viable option to help your business if you are experiencing a dip in cash flow. Sometimes access to funding can help you purchase more stock or inventory to increase sales and bring in more business. Short-term business funding also ensures that you are paying the loan off quickly and not getting yourself into a debt cycle. At Lulalend we help SMEs get quick, easy access to business funding so that they can see success and not digress. With business funding of up to R500 000 and flexible repayment plans, you can turn things around for your business and remain in a cash flow positive.