A common challenge for small business owners is ensuring adequate cashflow. Increasing costs of supplies, inventory or business operations can often outpace the money coming into the business. Without smart cashflow management, business owners can quickly land in hot water. But, says Trevor Gosling, CEO of online small business lender Lulalend, there are some key principles that business owners can follow to ensure the lifeblood of their business – cash flow – is not placed in undue peril. “Business owners need to keep an eye trained on budgets, overheads, suppliers and day-to-day expenses. Luckily, there are some tried and tested cashflow management tips to ensure there’s not too much month for your money.”
Gosling recommends that business owners consider the following:
#1 – Find ways of bringing in new business and retain 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.
Secondly, don’t forget about existing customers. Take advantage of your well-earned 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.
#2 – Build strong relationships with trustworthy 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. For example, because you’ve built a good relationship and the supplier knows you are a trustworthy client there may be opportunities for 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.
#3 – 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 then you need to? Do you really need that fancy espresso machine or trendy office furniture? Consider what are needs and what are wants.
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.
#4 – Go green
There are a couple of ways you can save money by being an environmentally conscious business. Why not go paperless, whether this is for emails, invoices, or bookkeeping? 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 Green Building Council of South Africa (GBCSA), says a green building on average saves 25% in electricity.
#5 – 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. Make sure that the space you rent is suitable for a small business and that subleasing doesn’t go against your own lease agreement. A shared workspace will also save you a substantial amount on utilities. For example, The Bureaux Flexible Work Habitats offer a desk space for R1,850 per month and it includes necessities like electricity, water, and Wi-Fi connection.
#6 – Invoice customers as quickly as possible
As a business, you want your clients to pay you as soon as possible. To get paid quickly, be sure to invoice them immediately after the service/product has been provided. For services such as those offered by electricians, plumbers and other similar trades, you could consider offering discounts as an incentive for paying early. While giving a discount may tighten margins slightly, it will also manage to free up cashflow in your business.
#7 – Be proactive
Don’t wait until your business is experiencing a cashflow slump. Make sure that you have documented a plan and a cost-reduction strategy in place so that you’re prepared when the leaner months arrive. Every business is bound to experience a bump in the road, but the true mark of a successful business is having a strategy in place to manage cash flow.
Short-term business funding is also a viable option to help your business if you are experiencing a dip in cash flow. Access to funding can help you purchase more stock or inventory to increase sales and bring in more business, and could ensure that you are paying the loan off quickly and not getting yourself into a debt cycle.