Tips For Businesses To Preserve Cash Flow And Increase Profits
by Arnab Dey Business Development 19 August 2022
Positive cash flow ensures that businesses can not only continue operations but grow and thrive. When cash flow is healthy, profits increase, and businesses can reach their goals. But preserving cash flow can be challenging for many business owners.
Checkout Five Useful Tips For Businesses To Preserve Cash Flow And Increase Profits
Here are some helpful tips to help maintain cash flow and increase profits.
1. Negotiate Favorable Payment Terms
If you’re like many business owners, you work with vendors who supply your business with goods and services. If you have an established, positive working relationship with a vendor, negotiate more favorable payment terms that allow you to delay payments.
For example, if you currently have 30-day payment terms, negotiate for 60-day terms.
Delaying payments for as long as possible will help keep cash in your business. You’ll still be fulfilling your commitment to the vendor, but you won’t have to take on debt to do so.
2. Equipment Leasing
If your business relies on equipment for its operations, consider leasing it instead of purchasing it when you need to replace or upgrade. There are reputable equipment leasing companies that cover your industry and can assist you with a variety of equipment, even if the costs are relatively high.
Leasing does have some advantages. For starters, your business won’t have to make a large upfront investment, which can easily swallow up your cash. In addition, lease payments will generally be less costly than purchasing new equipment outright.
Upgrading and replacing equipment is also much easier and less costly when leasing. In many cases, it’s just a matter of signing a new agreement and trading in your equipment.
3. Trade Products and Services
When businesses need goods or services for their operations, they typically pay cash for them. However, if you want to preserve cash flow, consider bartering instead. Exchanging products for products can be a win-win for all parties and keep more cash in your bank account.
Seek out vendors who offer products or services you need and are also in need of products or services that you can provide. Trading products and services can help both your business and the vendor’s business without it impacting cash flow for either of you.
4. Maintain Capital Equipment
Leasing equipment can be an effective way to conserve cash flow, but it’s always better to repair and maintain existing equipment when possible.
Implement a regular maintenance program for your machinery to keep it running optimally for as long as possible.
Employ or establish a working relationship with an experienced technician or mechanic to help keep your equipment running well and make repairs whenever needed.
Maintaining and repairing equipment will save you from having to purchase new machinery or having to sign new leases regularly.
5. Maintain A Lean Business
Maintaining a lean business will help reduce unnecessary costs and preserve your cash flow. It’s easy for costs to get out of control when businesses grow, especially when they expand beyond their core services.
Here are some tips for maintaining a lean business:
- Use the appropriate method used to maintain a capital account.
- Analyze every process for efficiency. Replace or eliminate processes that are time or money-sinks.
- Get feedback from employees. Gather input from your staff on how to improve efficiency.
- Carefully weigh the pros and cons of each new expense.
- Outsource when it makes sense and will save your business time and money.
- Look for less expensive or free options to meet your technology needs.
- Carefully analyze your team to ensure you’re not over- or under-staffed. If you have too many employees, it can really eat into your cash flow. Alternatively, having too little staff can leave the rest of your team feeling stressed and overworked.
Maintaining a lean business requires ongoing effort and evaluation of your operations, but it’s worth the effort to conserve cash flow. Find ways to trim expenses whenever possible without compromising on quality.
Don’t be afraid to cut products or services that aren’t performing well and showing no signs of improvement. The added expense can negatively impact your cash flow both now and in the future.
Finally, make sure that you’re using cash flow dashboards to track and manage your cash flow carefully. The tips above can help preserve your cash flow and maintain profits, but you still need a way to monitor and measure your progress. Cash flow dashboards can help by giving you an overview of your business’s cash flow and projections.