Sadly, even profitable businesses are going broke by not effectively managing their cashflow during hard financial times: it’s something that happens across the country every day.
It’s not surprisingly then, cashflow is one of the biggest challenges currently facing business owners, with some 92% reporting that they frequently experience stress due to cashflow concerns.
If you’re like many of the business owners we’ve talked with recently, you may have had to:
Reduce the scope of your operations
Source additional funding
Take a pay cut
Or even make long-standing staff members redundant
It’s not all doom and gloom, however: the good news is that while cashflow may be the first to take a hit during a recession, it is actually THE KEY to surviving the recession. Implementing strategic cashflow management policies and systems can literally transform your business bank balance within a month.
We’ve handpicked a few strategies that you can put into action in your business and see tangible results from straight away!
Our Top 4 Cashflow Management Strategies
1. Set goal-oriented budgets and proactively manage them.
Profit and Loss Budgets are still important but right now your focus should be on developing your Cashflow Budget, which will allow you to plan for your cash requirements and shortfalls in advance.
2. Focus on increasing sales and income – a feat that, even during a recession, is possible.
Be proactive, provide real value to your customers and identify creative ways to increase your retention rate, generate leads, and increase conversion.
3. Avoid easy tactics like discounting, which can be dangerous to business profitability.
Even a 10% discount can result in your business having to increase sales by 100% to achieve the same gross profit pre-discount.
4. Reduce your cashflow cycle by collecting debtors faster, selling stock more quickly, and negotiating longer credit terms with creditors.
Putting in place systems like a debtor collection system, credit policy, stock control system and purchasing system will encourage inflows and put less pressure on the immediacy of outflows, freeing up more cash for the business.
Cashflow is the lifeline of your businesses, and with the right resources and support, you can turn around almost any cashflow situation or dramatically increase the current cash ‘buffer’ in your business.
At YBT, we know that this is a critical issue for business owners right now and we wanted to make sure that you too can benefit from the expertise of our expert accountants.
If this blog raises questions for you about the state of your business, contact the team at YBT today. Experts in all things business, they will sit down with you and take you through your options.
Just phone 03 479 3890 or email email@example.com today!