Improving cash flow
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Tips for keeping the money flowing in even in tough times.
Money coming in is critical for every business, regardless of industry or location. Here are tips to help improve your cash flow, including some business model ideas you might adopt.
The first step in getting paid is sending the invoice. The longer it takes to get invoices out, the longer it will take to get paid. Don’t delay!
An electronic invoicing system will help get invoices out quickly and will reduce costs for paper, postage and labor.
Pay bills electronically
Like an electronic invoicing system, electronic payments like ACH transfers save time and reduce costs. Plus, you’ll keep money in your business checking or savings account longer, allowing you to earn more interest.
Evaluate if it’s time to raise prices
Has it been more than a year since you increased prices? Are competitors charging more? Are your costs rising? Do you have folks on a waitlist for your product or service? A “yes” answer to any of these questions could mean it’s time to raise prices.
Optimize your inventory
Analyze sales data to determine the optimal levels of each product to have on hand to meet customer demand. Also, keep in mind how seasonal changes may affect forecasting. Fine tuning your inventory can help preserve cash flow by making sure you don’t have too much cash tied up in product.
Apply FIFO, first-in, first-out, to make sure you don’t end up with shelves full of old product you may have to discount. If you sell perishable products that have to be tossed by their “sell by” date, FIFO is especially important.
Money tied up in goods that don’t sell hurts your cash flow. Sell off these items, even if that means discounting them.
Offer a subscription
Subscriptions are an excellent way to keep cash flowing. In recent years, we’ve seen everything from movies and meal plans to ink cartridges and CRM. If you have a product or service people regularly use, how might you convert it into a subscription?
Look to these medical models
Sometimes it’s useful too look at what other industries are doing. In healthcare, concierge medicine and Direct Primary Care (DPC) business models are growing as physicians grow weary of pressures to see more patients and work faster. With concierge medicine and DPC, patients pay for a monthly, quarterly or annual fee.
In return they get 24/7 access to a physician and highly personalized attention. These two medical models appeal to patients who want direct access to their doctors, were frustrated with long wait times for appointments, and have the means to pay.
If similar dynamics exist in your industry—where folks are fed up with status quo—might a concierge or direct provider model where you get paid each month work for your business?
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