{"id":639,"date":"2021-08-24T17:35:59","date_gmt":"2021-08-24T21:35:59","guid":{"rendered":"https:\/\/jasdeepsingh.net\/?p=639"},"modified":"2021-08-24T17:35:59","modified_gmt":"2021-08-24T21:35:59","slug":"5-tips-to-maintain-cash-flow-for-small-businesses","status":"publish","type":"post","link":"https:\/\/jasdeepsingh.net\/5-tips-to-maintain-cash-flow-for-small-businesses\/","title":{"rendered":"5 Tips to Maintain Cash Flow for Small Businesses"},"content":{"rendered":"
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Cash flow is the life-blood of any business. This becomes even more elemental to a small business that needs a steady stream of incoming cash to pay its suppliers, employees, and utilities.<\/p>\n
The pandemic has created a situation of extreme distress for most small businesses in North America. Lower foot traffic, a shift in consumer preferences towards online shopping, lagging supply chains, and a challenging job market have taken a toll on the demand for the goods and services they sell.<\/p>\n
In fact, according to a survey from the National Academy of Sciences of the United States, the median small business had roughly 2 weeks of expenses worth in cash, which points to how fragile these companies are in such an uncertain environment.<\/p>\n
Here are five strategies to improve cash flow and increase overall viability.<\/p>\n
A credit policy is a set of conditions that businesses establish for their credit sales including the length of the credit, the penalties applicable to late payments, and the maximum amount of credit extended per customer.<\/p>\n
In times of financial distress such as this, businesses should tighten their credit policy in a way that favors responsible clients while also preventing clients that have not shown positive signs of creditworthiness from affecting the business\u2019 cash cycle.<\/p>\n
This can be achieved by limiting the amount of the credit limit extended to irresponsible clients, by giving them an incentive for paying on time, or by closing the credit account if the situation demands it.<\/p>\n
That said, make sure your credit policies<\/a> continue to be favorable enough to incentivize sales rather than discouraging clients from making large purchases due to their strictness.<\/p>\n Businesses should increase their collaboration with suppliers that offer the most flexible credit and delivery conditions. While these vendors may be more costly, but they make up for it with reduced labor, inventory, and administrative expenses.<\/p>\n Although this could increase the price of the end product, improved delivery and inventory may drive sales. In addition, there are times the goal is not necessarily to turn a profit. Instead, businesses may need to focus on postponing obligations as much as possible to give sales enough time to recover. Live today to fight tomorrow!<\/p>\n Discretionary expenses are those that are not essential for the business to function adequately.<\/p>\n These expenses are not necessarily just things that the business doesn\u2019t need, as they could also be hidden within the categories that seem to be \u201cessential\u201d but are actually inefficient.<\/p>\n Think of a marketing campaign that is not yielding positive results or an office space that is too expensive.<\/p>\n By streamlining these costs, companies can reduce their break-even point and, as a result, improve their cash flow.<\/p>\n Retail businesses should assess their inventory every week to identify items that are not being sold at the pace they should.<\/p>\nTip #2: Work with the suppliers that give you the most favorable conditions<\/span><\/h2>\n
Tip #3: Avoid discretionary expenses<\/span><\/h2>\n
Tip #4: Analyze your inventory and push down long-held items<\/span><\/h2>\n
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