In order for a business to consistently meet its financial obligations to customers, creditors, employees, investors, suppliers, it will need to properly manage its cash flow. Here are six ways for a business to save costs and increase its cash flow.
#1: Offer Cash Discounts
A business can offer cash discounts to customers willing to pay cash immediately for goods or those who are willing to make prepayment for goods. This will significantly increase its cash flow.
#2: Receivable financing
This is essentially the sale of business invoice or projects that have already been secured to a third party who goes ahead to process the invoice while business receives cash from it. Such scheme allows a business to have access to cash upfront rather than wait for an expected invoice to be paid.
#3: Outsourcing of non-core activities
Outsourcing involves ceding non-core business operations and activities to other businesses that are specifically set up for such services. Outsourcing non-core activities will help the business save costs in areas of salaries, acquisition of office furniture and training costs helping to boost its cash flow. Fixed costs will be lowered. The rule of thumb is to keep fixed costs no more than 30% of the business - especially the smaller ones.
#4: Shared Resources
The business can significantly increase its cash flow by sharing its resources (and the costs) with another business. It can share office space, secretaries, human resource personnel, and accountants amongst others.
#5: Negotiate Discounts with Suppliers
Find suppliers that are willing to provide the business with significant discounts in exchange for bulk purchases and a long term partnership. This will go a long way in boosting the cash flow of the business.
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