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How to Control Your Cash Flow to Your Advantage (Guest Post)

Topic: Business Management,Cash Management,Growing Your Business,Managing Your Business,Small Business Tech Recs,WorkingPoint News | Comments Off on How to Control Your Cash Flow to Your Advantage (Guest Post)

Posted on May 21, 2012 by workingpoint

Cash flow is one of the trickiest things for a business owner to master. Novice business owners often think that all that ultimately matters is sales. Unfortunately, selling something doesn’t always mean that your business has cash in its proverbial pocket. All the money you make from sales has to go to pay suppliers, pay employees, and pay for your office space.

Only once you’ve paid for all the necessary expenses do you stand to make a cash profit. And if you don’t have enough cash to pay the bills at specific times of the month, you’ll find yourself in a pretty bad situation. Or if you’ve spent too much on inventory that isn’t selling, you may have some difficulty making any sort of profit at all. In order to maximize the amount of cash flowing into your business and the profit you make as a business owner, you have to control your cash flow properly. Luckily, doing so is a science you can master with some effort. Here are a few important cash flow control tips that you may find to be advantageous for your company:

Ask your suppliers for some wiggle room

Try not to pay for anything until you receive it and are able to inspect it. Damaged goods equal lost time and lost money for your company. Ideally, you should negotiate with suppliers to pay during the certain time of the month or cycle that’s most convenient—preferably after you’ve made enough money from selling the inventory you received from your suppliers. Payment agreements don’t always work out in your favor because of the individual needs of your suppliers. However, if you can negotiate some flexibility when it comes to paying them, you won’t have to worry about having to scramble to pay them at an inconvenient time.

Get rid of what isn’t selling

A big chunk of your company’s cash is tied up in your warehouse and/or stockroom in the form of inventory. Your goal, of course, is to free up that cash by selling the inventory. However, slow moving products can dramatically slow down the process of making the kind of profit you need. So, take a look at your inventory data and identify products that simply aren’t selling and that aren’t selling fast enough. Once you identify the problem products, find a way to sell them (by discounting them dramatically, for instance). The point is to get the products off your hands and make a small profit off of them. When they’re off your hands, you can focus on ordering more of what does sell well.

These are just two important strategies that will help you control your cash flow in your favor. Just remember that you can’t take money home until you’ve paid all your bills. So, be strategic about how you do business with customers and suppliers and how you handle your inventory.

Author’s Bio: Carolyn is a guest blogger who writes about small business success strategies, e-commerce, and order management for Shopify, BigCommerce, and 3dcart subscribers.

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