Many small and medium businesses have cash flow problems.
One of the reasons why this happens is because there is not enough money flowing into the business.
This could be because the business isn’t selling enough products or services to customers. It could also be because expenses have increased while income – sales – have not, or not enough to compensate for the higher expenses.
Or, it could be because the business spends too much money on things that are not absolutely necessary to manage and grow the business.
As a result, cash flow problems arise and businesses struggle to pay their expenses.
The approach that is most often followed is to look for ways to increase the amount of money that is flowing into the business. For example: by attracting new customers that are highly profitable, increasing your sales, increasing your prices, or by introducing more expensive products/services.
This is a good approach, but it can take time to yield results.
The number one way to quickly increase your cash flow is to reduce the amount of money that flows out of your business.
You can easily increase your cash flow by tracking expenses!
Start by analysing your business expenses.
Do you have any expenses that are not 100% necessary? Eliminate them!
Most businesses have unnecessary expenses.
An example: one business I worked with had a paid email marketing subscription. They spent a lot of time every month writing a detailed newsletter for their customers.
When we analysed their marketing effectiveness, we realised that most of their customers were finding them through social media. Hardly any customers were responding to the newsletter. And the newsletter had zero return on investment when it came to bringing in new customers.
The email marketing subscription was not a huge expense. But it was an unnecessary expense.
Getting rid of this expense was an easy way for this business to keep a little more money in the business.
If your business is in serious financial trouble, a small expense like an email marketing subscription will not keep your business alive.
(And if your business keeps losing money, see this article about what you need to do.)
But if you have many of these unnecessary expenses, you can save a significant amount of money.
Money that can then be used in a more effective way to benefit your business.
Also try out these other ways that a small business can increase their cash flow.
I orginally published this article on LinkedIn.
