Five tips for managing negative cash flow

Too many businesses fail as a result of bad cash flow management. Sending great businesses with big potential into a quick downward spiral. So how do you recognise that your business is in the red and how do you fix it? Companies with a negative cash flow are essentially spending more than they are making so it really comes down to bringing in more sales, reducing costs or both. Once there, you have to make sure that a positive cash flow is maintained and that your financial outlook remains positive. But let’s break it down a bit more. Here are our top five tips on how to best manage your business finances and curtail negative cash flow:

1. Get your expenses under control

Whether your business is large or small, unnecessary expenses will suck the profit out of your operation. Start by analysing your expenses in detail and figure out places where you can reduce spending and cut costs. This can be done in simple ways like switching off your computers at night and using freelancers instead of full-time staff until you absolutely need to take people long-term. Try and reduce the rent on your property and see if you can lower your manufacturing costs. This will require some shopping around and negotiating with suppliers but hang in there because at some point your hard work will pay off.

2. Bring in more revenue

This may sound like an obvious way to increase cash flow but if getting your expenses under control isn’t taking care of your negative cash flow, your next step needs to be finding ways to bring in more revenue. Examples include changing up your marketing campaign, testing new markets and training staff on more efficient sales strategies. You can also consider re-jigging your payment terms to ensure that customers pay you quicker. Faster payments mean better cash flow.

3. Build a budget

If you want to increase cash flow it is essential to have a solid budget in place. This is your roadmap for running your business and should cover three key areas: What’s coming in, what’s going out and what’s left over to spend on other expenses. Without this, you’ll have no idea what your company is making and you won’t be in a position to manage your business’ finances.

4. Bring your staff on board

There is no way to turn a ship around without a crew on board. Your staff need to collaborate with you on your cost-cutting schedule, by selling smarter and bringing in their share to increase cash flow.

5. Consider lenders and investors

Increasing cash flow process won’t happen overnight, and it may take at least a quarter to see the returns and increase in cash flow. In the meantime, consider an investor, short-term loan or cash advance. A cash advance is a great option for retailers as funding can be acquired in less than 48 hours and has a unique repayment method that works directly in line with your turnover. Meaning you get the working capital you need to tie you over before your business can wash its own hands. For more information on assistance with negative cash flow and smart business funding contact Merchant Capital today.

 

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