May
23
By admin|May 23, 2012|Category: Operations

Many new business ventures fail as they struggle to generate enough cash flow to sustain operations. Even for established companies, positive cash flow is required not only to take care of day-to-day expenses, but also to invest in infrastructure and future growth.

1. Get rid of excess inventory
Excess inventory causes worry for every business. It adds to locked-in revenue and increases overhead. Companies are recommended to follow the accepted Japanese principle of ‘Just-in-Time’ to ensure that there is no inventory pile-up.

2. Reduce your accounts receivables
Reviewing payment terms and methods and collection policies can help improve cash flow. Long pending receivables can become bad debt that is ultimately written off, causing further stress to the business.

3. Control costs by evaluating expenses and approval authorities
An efficient expense approval process is needed to monitor business expenses. Minor expenses need not be scrutinized before approval, but it is important that such a mechanism is in place before the company can streamline its operations.

4. Improve revenue
Better customer retention and more repeat purchases are a boost to the company’s revenue and hence cash inflow. While new business development takes time, existing customers can keep the cash registers ringing.

5. Improve inventory turnover
Apart from getting rid of excess inventory, an improved inventory turnover also helps the business to generate cash flow quickly. By understanding customer needs and demands and stocking mostly items that move, companies can improve cash flow.

To ensure sustainability, companies need to go back to the basics and focus on their numbers. Many other specific factors can hinder the health of your cash flow, but the above tips can serve as general guidelines to improvement.


Sandy Huang is the principal of Pinpoint Tactics Business Consulting in Vancouver, BC. She strives to empower small business owners by equipping them with the tools they need to be more competitive and profitable. Sandy also teaches business courses, conducts workshops, writes for the Vancouver Observer and Small Business BC, and sits on the board of Burnaby Counselling Group.
 

Share/Save

Comments

Thanks for the advice, the tips on accounts receivable and inventory are a great reminder to help keep on track!

There is so much of valuable information in this blog. It has really helped me rethink my strategy on how to maintain a positive cash flow.

I'm glad that the blog post has provided value to you, Fey. All the best with your company's cash flow!

Thanks for the great blog. I have forwarded it on to lots of small businesses who can use this practical information right away. Dawn

I've seen many business owners struggling with keeping a positive cash flow. In most cases, steps can be taken. So thank you for forwarding the blog post, Dawn!

Post new comment

The content of this field is kept private and will not be shown publicly.
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.
Image CAPTCHA
Enter the characters shown in the image.
By submitting this form, you accept the Mollom privacy policy.