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20 More Ways to Increase your cash Flow and Profit

Updated on November 16, 2013

1. Review your expenses regularly. Compare your expenses against your budget, previous year or period and as a percentage of sales.

2. Train your employees to be thinking about how expenses can be reduced. Reward them for ideas that reduce expenses. Rewards don’t have to always be monetary. Be creative with the reward system.

3. Implement performance measures to monitor your expenses. ‘You manage what you measure’. Choose two or three areas and measure those areas. You may be surprised what you might find.

4. Monitor stock regularly. Use ratios such as inventory turnover and days inventory to compare to previous periods and industry standards.

5. Cut your losses and move on. Clear old and outdated stock by packaging together or discounting. Don’t hold onto old stock in the hope you may sell it in the future. It will be better to use your resources on other areas of your business.

6. Don’t buy too much stock even if a discount is offered if it will take an extended time to sell. This willdry up your cash flow very quickly.
7. Focus on a ‘just in time’ ordering system to save build up of stock. An increasing amount of stock on hand will drain your cash flow.

8. Set minimum and maximum levels of stock and stay within these levels.

9. Don’t pay too much or too early. Ensure you have a step by step purchasing procedure that is followed and monitored.

10. Negotiate longer payment terms or a payment plan if your business is struggling. Be up front, most business owners know what it is like to have cash flow problems.

11. Prepare 3 month cash flow budgets. A cash flow budget includes all the expected cash inflows for the month less all the expected outflows for the month. I prefer to prepare 3 month cash flow budgets as opposed to yearly cash flow budgets.

12. Review your assets for the need to upgrade. If there is a more efficient option available and it makes economic sense then upgrade to the more productive asset.

13. Weigh up the benefits and costs of both purchasing and leasing. The better option may not be the same each time. Seek independent professional advice.

14. Always seek advice from your tax accountant before the end of the financial year to minimise your tax. It’s usually too late after the year has ended.

15. Reduce owner’s drawings or salary. Don’t withdraw more than the business is making.

16. Plan your growth. Don’t grow your business just for growth’s sake. Increased sales do not automatically mean increased profit.

17. Use different measures for financial performance. The income statement is not the only method to measure your business’s performance. Use benchmarking, ratio analysis or key performance indicators.

18. Review your overdraft. Review your current fee structure and comparing to other banks.

19. Ask suppliers for quotes. Periodically request quotes from different suppliers to ensure you are getting value for your money.

20. Set aside money for your tax bill. Regularly put into a separate bank account money for your tax bill. For example, if the various taxes account for 20% of sales each year then if possible, put 20% of sales into another account at the end of each month.

Check out my other related hubs: 20 Ways to Increase your Cash Flow and Profit and Another 10 Ways to Increase your Cash Flow and Profit.

For more resources you can download my free e-Book "10 Cash Flow Strategies for a Successful Business" here or visit my website Beyond the Numbers.

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