Do you know your company’s cash flow position every day? You have to know it to maximize it. These 5 positive cash flow practices will ensure you maximize cash flow. There is no other issue as important as cash flow, because the biggest cause of company failure is negative cash flow.
Positive cash flow means your receivables and payables are of sufficient volume and are timed to provide a cash cushion each month. You should accumulate this excess cash in a reserve to cover six months of expenses in event of an emergency. Once you’ve accumulated a 6-month reserve, you can build free cash flow.
5 Practices that Create Positive Cash Flow
- Require a profit from every sale. Are you thinking “huh?” Who doesn’t do that? The companies that use these all-too-common tactics:
- Loss leaders
- Discount because of customer demands
- Discount out of fear they’ll go elsewhere
- Discount out of fear the competition will beat your price
- Do you underestimate expenses, or commit to high expenses in the hopes of making a great impression?
Every one of these practices hurts your ability to create positive cash flow.
2. Require daily cash flow reports. Cash flow reports show you where and when cash comes and goes. Paying out before you get receipts causes negative cash flow. Daily reports help you stop negative cash flow immediately.
3. Improve Terms and conditions. As the seller or provider, you must write and enforce terms and conditions that create positive cash flow. The leading cause of negative terms and conditions are industry “standard practices.” Don’t fall for them.
4. Define your profit requirements with Strategic Statements
Not all products or services should contribute the same percent of profit. Profits vary by dollar price, by value of the purchase to the buyer or by tangible intangibles such as access and status.
5. Teach everyone in the company about cash flow. Involve your employees at every level. Your employees will be a huge force for positive cash flow if you tell them why it’s important and make it clear how the company does it.
- Teach them how to get a sale without a loss leader or a discount.
- Explain how customer service impacts profits.
- Help them serve customers and clients such that they want to buy more higher-value/higher-profit offerings.
- Share your visions for growth and how they’ll be part of that over time. All of these discrete acts contribute to positive cash flow.
Start Creating Positive Cash Flow NOW
You can adopt these practices one at at time. We’ll take you and you team through each one, whether it’s one per week or one per month. Schedule your discovery call and get started on the road to positive cash flow for the long term.
About Money Matters: Envisioned by Susan Trivers, Money Matters provides everything you need to secure your company’s money. It’s your one stop for the best advice about cash flow, profits, growth, taxes, and costs. You can choose to focus on one area or a combination. You can also choose to go deep with customized services from Trivers Consulting Group. Request a complimentary discovery call to get started making more money. 703-801-0345.