No business in this world can afford to ignore the cash flow. A recent study shows that more than third of SMEs have issues with cash flow as an obstacle to their growth. Here are 5 ways in which you can improve your cash flow and increase the value of your business.
1. Synchronization
You need to know that the cash inflows moment and financial result depend on the company’s business operation. This means that you need to be very careful when planning the various aspects of your business: buying or selling on credit, debt collection, operating costs, and, of course, actual sales receipts. It sounds very complicated, but our team can lead you and help you with these important details of your business.
2. Expand the activity
Everybody knows that more sales equal higher profit. However, our advice is not to take into account only profit growth and to ignore the issue of cash flow. Although your accounting documents can show a higher proft, this does not mean that money will be in the company’s account when you need it.
3. Improve cash flow with the help of the team
When we talk about cash inflows and outflows, we are actually talking about a projection of the whole business. It’s not a matter that concerns you only as your owner or manager, but the whole team. Each team member is involved in the revenue generation, but also they are involved in many costs.
That’s why it’s a good idea to involve employees in cash flow monitoring in order to raise their awareness of the impact they have on cash movements. You will be surprised how much this decision will impact your team, and it will determine it to be more aware of the concrete impact it has on the business.
4. Follow the balance and adjust the values
It is not advisable for a company to record the negative cash available at the end of the period: day, week, month, quarter, year etc. A negative disposition would mean that the company does not have enough financial resources to cover current payments in that period. If such a situation occurs, you will have to redefine the working hypotheses:
• the company will have to contract the necessary credit for the investment earlier;
• the company will use a funding line to cover cash needs for certain periods of time.
5. Increase prices
Rising prices is a concept that scares many business owners. They are worried they will reduce sales. But it is good to experience the prices to find the perfect number – how much are the customers willing to go with you? You can not know unless you take a chance.
Be sure that cash and cash inflows will not be unknown and you will feel more confident about any situation. So you can now analyze the company’s cash flow, know it well and turn it into a powerful ally.
And do not forget that EBC is here for that.
Sandra Tanase
Managing Partner | Head of Israel Mission
Mob: +40 79 9999299