Sustaining Your Business – While Accelerating Growth

 

Now we have vaccines, the economy is slowly returning to normal, and you are perfectly poised to improve and grow your business.

 

As 2021 unfolds, you may feel like your economic situation is still out of your control. Yes, there are more challenges ahead. But to grow your business, it is essential that you have a handle on your cash, both current and projected into the future. There are ways you can gain insights to manage your money and feed your growth.

 

We are here to help you with your projections and decision-making.

 

What are the actionable steps you can take to maximize your cash?

 

 

  • Reduce your expenses.

 

Did you know that your payment terms with vendors and suppliers can be negotiable? Many vendors and suppliers provide financial incentives or discounts for early payment. Negotiate your payment terms so that they align with your collection terms, and structure your payment strategy to maximize discounts.

 

Your goal is to keep your cash balance positive. To that end, it will be necessary to control expenditures. With every reduction in your business costs, you are sustaining your growth.

 

 

  • Revisit your office space commitment.
  • Reevaluate how much space do you now require for your new hybrid workforce model?
  • Take advantage of depressed office space prices to move your organization to less expensive quarters and occupy less space.
  • Have did you think of running your business from home?
  • Considering expanding mobile use throughout your organization?
  • Results: You will benefit from savings on insurance, taxes, utilities, and cleaning services.

 

 

 

  • Work to retain your current employees.

 

  • Survey your employees to know who is unhappy or thinking of leaving.
  • Consider Covid-19 bonuses, if financially feasible, for your entire staff.
  • Hire contract workers or freelancers to replace those who choose to leave.
  • Results: Savings on recruiting, training, and your reputation remain consistent with your customers. Individual employees that are associated with your company are still representing you. Keeping your personnel will jumpstart your growth by being known to your customers and having insights into attracting more customers – a win-win.

 

 

 

  • Switch to cloud computing.

 

 

  • Cut capital costs and your ongoing IT expenses.
  • Eliminate servers, maintenance, disaster-recovery provider, server-related resources, software upgrades, and server-related utilities.
  • Attract tech-savvy hires by having the latest technology in use.
  • Result: Flexibility to add/subtract features and storage, as needed, for your cloud apps, availability to everyone 24/7, and SaaS provider is now responsible for data recovery, cybersecurity, and keeping software up to date. Your employees will be excited to learn the new technologies that will be integrated with cloud apps.

 

 

  • Get paid faster and more frequently.

 

Delayed payments are the killer of any business.  By decreasing your collection period (the time it takes to collect payments or debts), you can avoid cash crunches and enjoy better cash flow, allowing you to invest in other plans.

 

While managing your collection period may sound complicated, it can be as simple as ensuring invoices are sent correctly and promptly.

You are providing a service or selling a product. Your clients’/ customers’ payments are the lifeblood of your business.

 

 

  • Invoice electronically.
  • Move your receivables to be entirely electronic.
  • Shorten the terms on your invoices.
  • Eliminate credit, except for your long-term clients/customers.
  • Ask for advance payments from new clients/customers for the first three months for large orders.
  • Results: Payments will go directly into your bank, receipts occur as you need them, decreasing the possibilities of non-payment, trimming receivable staff, and savings on salaries, benefits, and employee-related expenses while receiving more monies sooner.

 

 

  • Provide inducements for payments.
  • Discount early payments made before the due date.
  • Set an expiration date for discounts.
  • Use late fees to encourage on-time payment.
  • Results: Clients/customers have a reason to pay you ahead of time, and customers/clients also have a reason to pay on time.

 

 

 

  • Optimize your pricing.

 

 

Optimizing your pricing model will have the most significant impact on cash flow. Gross profit and its associated metric, gross profit margin, are essential components of the most critical decision: pricing each product/service.

 

 

  • Calculate gross profit margin
  • Setting and using a gross profit target to cover all of your expenses is the secret to profitability.
  • Gross profit margin is your gross profits shown as a percent of revenue.
  • You need to understand gross profit margins, so you’ll know when to increase prices on which products and services.
  • Increasing your prices at the right time on the right things is the best way to impact cash flow, and as a result, your gross profit margin.
  • Looking at gross margin, a percentage is the best way to track the profitability of a customer or job.
  • Tracking gross margin every month and comparing it to your target gross margin gives you leading indicators of cash flow problems.
  • A change in gross margins can provide insight into a job, client, or company issues. This kind of actionable intelligence will help with pricing decisions.
  • Result: You will know your sales are covering your operating expenses. Now focus on expanding sales.

 

 

  • Cash flow projections define growth strategies.

 

By creating your accurate cash forecast, you will determine how money is cycling through your company. Once you have done that, you could better manage your business and find ways to generate more profit.

 

  • Establish a cash flow projection process to measure, monitor, and adjust weekly with a rolling 3-month window.
  • Glean your information from weekly cash flow bank statements.
  • Know your cash inflows and outflows from operating, financing, and investing activities.
  • Results: Sales, expenses, and cash balances data is available for each growth scenario, and effects are anticipated and adjusted as actuals occur.

 

 

 

Make decisions to maximize your return on investment.

 

 

  • How will your financial position be affected by your funding your expansion?
  • Do you have an emergency reserve to handle your potential unexpected occurrence(s)?
  • Results: Plans are updated and adjusted while maintaining favorable cash positions, and under your leadership, your business thrives.

 

 

 

Conclusion

 

 

Understanding your cash flow can be a daunting experience. You can ensure that your business will be running successfully, even at times when loss overtakes profit.

 

Your employees will have confidence in your decision-making, know you are moving forward based on data, and have clear action plans.

 

Plan! Adapt! Manage! Succeed!

 

AccuComp Enterprises is a team of experienced CFOs that can help you grow.

 

Feel free to reach out to book a conversation by going to https://www.accucompenterprises.com/lets-chat/.

 

If you prefer, email us: r.margallo@accucompenterprises.com.