Many CEOs tend to place their company goals ahead of its cash flow, but later realize the importance in dire straits. Ignoring the latter often leads to issues such as receivables management, credit risks and new investment shortfalls, all of which can lead to business failure.
The Simply Cash Flow blog collected statistics from businesses all over the globe and found that most considered cash as their biggest challenge. The report also cites cash flow issues as one of the reasons why businesses fail in the first five years.
Cash flow problems also extend to newly formed businesses. A research by Harvard Business School’s senior lecturer Shikhar Ghosh reveals that if failure implied liquidating assets and investors losing money, then around 30% to 40% U.S. start-ups with high potential fail. And if failure implied as not being able to see the return on investment as projected, such as a specific revenue growth or cash flow break even, than 95% of start-ups fail.
Therefore cash flow is downright vital for consistency and preventing the business from being fickle. Those who are able to keep the cash flowing can improve nearly all aspects of their businesses and create a cushion for long-term success.
And thankfully, there are ways to avoid the panic stage of bringing in debtors and keep the cash flowing:
1. Trade excess supplies and services
A business of any nature can possess excess supply and services, which can be traded to other businesses to keep the cash pumping. This can be done through exchange barter, a transfer or a direct selling strategy. As an example, a tech-based startup can have surplus supplies of IT equipment including Macs, laptops, Wi-Fi devices etc. which can be sold to other firms operating in the same industry.
IPv4 Market Groups IPv4 transfer service is a great example to help define this strategy. An organization can transfer excess IPv4 address space (the technology that makes it possible for consumers and businesses to connect devices to the web) to other organizations facing shortages/ willing to provide compensation for the associated cost for use and transfer. Such strategies also prevent buildup of excess capacity and depreciation of unused supplies and services.
2. Make it easy for clients to pay
Clients and customers should be presented with a variety of payment options so they can make payments through their preferred methods. Technologies and services that allow cashless transfers should be integrated at all levels for faster payments and high payment turnover rates.
A good option to track outstanding invoices can be a point of sale software, which is compatible with most devices and platforms including the latest smartphones and tablets. They can be used to chase due invoices and send reminders for timely payments.
3. Offer layaway programs
Layaway programs have gained attraction in recent times over sale plans. These programs allow customers to decide on a specific product/service, which then gets reserved for future sale and delivery after the payment has been processed. Companies can use this method to generate and use cash before incurring the actual cost.
Brick and mortars including Walmart and Sears are prime examples of companies putting layaway programs to good use. And when planned properly, these programs can also result in a profit for businesses.
Got any out-of-the box tips to pump cash into a business? Feel free to share them.