How to Intentionally Drive Cash Flow in your Business

For your business to be as healthy and prosperous as possible, you must keep cash flowing steadily through its veins. That means taking a proactive and intentional approach to managing your company’s finances.

When you take a deliberate approach to drive cash flow in your business, you’re able to:

• Make strategic decisions about where to allocate your resources
• Ensure that you have the funds available to take advantage of opportunities as they arise
• Build a cushion to protect against lean times
• Support long-term growth and sustainability
• Weather unexpected bumps in the road (such as a slowdown in sales) without putting your business at risk

But what does it mean to be proactive and deliberate about driving cash flow in your business? 

It means conducting regular cash flow analysis to improve cash flow systems, putting measures to increase your cash flow, having a cash flow plan, and executing it. Let’s take a look at how you can put these measures into place in your business.

Step One: Improve Your Cash Flow Systems

One of the key ways to increase your cash flow is to take a close look at your current systems and processes. Are there any inefficiencies or bottlenecks that are slowing things down? Identifying and addressing these issues can help you to improve your overall cash flow.

Some common areas of inefficiency include:

• Poor inventory management practices
• Inefficient invoicing and collections processes
• Lack of visibility into where funds are going

The solution? 

Implementing best practices in these areas can help you to streamline your operations and improve your cash flow. This includes:

• Monitoring your cash flow regularly to identify any issues
• Automating your invoicing and collections processes
• Using inventory management software to keep track of stock levels and improve forecasting
• Encourage customers to buy more by advertising related products and selling similar items together
• Liquidate old inventory to free up cash
• Implement cost-cutting measures such as negotiating better payment terms with suppliers and lenders, unsubscribing from services you no longer use, and reducing unnecessary expenses
• Leasing equipment instead of buying it outright to save on upfront costs
• Introducing mobile payment solutions to speed up payments

Step Two: Put Measures in Place to Increase Your Cash Flow

Once you’ve identified some areas of opportunity to improve your cash flow, it’s time to take action. This means putting measures in place to increase the amount of cash coming into your business.

Some common strategies include:

• Increasing prices
• Offering discounts or promotions
• Introducing new products or services
• Growing your customer base by amping up your marketing efforts
• Finding new sources of revenue

Step Three: Have a Cash Flow Plan—and Stick to It!

A cash flow plan is a road map showing you how much money you need to bring in and when to meet your financial obligations. This type of planning can help you avoid surprises down the line and keep your business on track.

Your cash flow plan should include:

• A detailed analysis of your current cash flow situation
• Goals for where you want your cash flow to be
• A timetable for reaching those goals
• Action steps for how you will increase your cash flow

Once you have a plan in place, it’s essential to stick to it. That means monitoring your progress and making adjustments as needed to ensure that you are on track to reach your goals.

What are you doing with positive cash flow?

Positive cash flow is when your business has more money coming in than going out. This is a good thing! It means that you have extra money on hand to reinvest back into your business or use to pay down debt.

Some common ways to reinvest positive cash flow back into your business include:

• Hiring new staff
• Expanding your operations
• Investing in new equipment
• Upgrading your facilities
• Developing new products or services
• Launching marketing campaigns
• Offering employee training programs

If you’re not sure what to do with your positive cash flow, talk to your accountant or financial advisor. They can help you to make the best decision for your business.

Step Four: Execute Your Cash Flow Plan

The final step is to put your cash flow plan into action. This means taking the necessary steps to increase the amount of cash coming into your business. Remember, it’s important to monitor your progress and make changes to your plan as needed.

There are a few key things you can do to increase cash flow:

• Increase sales: Increasing sales is the most obvious way to bring in more cash. If you’re not bringing in enough revenue, it’s time to examine your marketing and sales strategies closely. Are you targeting the right audience? Are you pricing your products or services correctly? Are you making it easy for customers to buy from you?
• Reduce expenses: Another way to improve cash flow is by reducing your business expenses. Take a close look at your budget and see where you can cut back. Do you need to rent office space? Can you get by with fewer employees? Are there any other areas where you can save money?
• Improve collections: If you’re not collecting payments from your customers on time, it will hurt your cash flow. Make sure you have a system in place for invoicing and collections. And don’t be afraid to follow up with customers who are delinquent on their payments.
• Get financing: If you need additional cash to cover short-term expenses, you may want to consider getting a business loan or line of credit from your bank. Just be sure to shop around for the best terms and only borrow what you need.
• Plan for expansion, equipment, bulk/large purchases: Another great way to maintain a healthy cash flow is by planning for upcoming expenses. If you know you’ll need to purchase new equipment or expand your business in the near future, start setting aside money now. This will help you avoid the need to take out a loan or tap into your emergency fund when the time comes.

By following these tips, you can ensure that your business has a healthy cash flow.

Work with an Experienced Partner

Driving cash flow in your business doesn’t have to be difficult. By taking a close look at your current systems and processes, you can identify areas of opportunity to improve your overall cash flow. And by putting measures in place to increase the amount of cash coming into your business, you can ensure that your business is on solid financial footing.

If you need assistance with driving cash flow in your business, consider working with an experienced partner. At Celerity Accounting, we specialize in helping businesses and startups improve their cash flow and achieve their financial goals. We offer a wide range of services, including cash flow analysis, budgeting/financial forecast accounting process improvements, and financial consulting.

Our team of experts will work with you to develop a customized cash flow plan that fits your unique needs. Contact us today to schedule a no-obligation consultation. We look forward to helping you take your business to the next level!