Keys to improving your company's cash flow

Money is essential for a company, if you are the owner of an SME you know it better than anyone, that is why in this article you will find the keys to increasing the cash flow of your company.

But what is cash flow? It is simply the amount of net money that enters and leaves your company in a given period. Cash flows are used so that, as an entrepreneur, you know what capacity your company has to pay debts. It is a tool to measure the level of liquidity.

With cash flow, you can evaluate the quality of your company's income, its ability to generate money, and thus know if you are solvent or not. Therefore, it is important that you know how to take control of your company's capital through cash flow.

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Types of cash flows

Cash flow can be positive or negative, it will be positive when you have enough money to meet your company's expenses and you have money left over for unforeseen events that you can add to the reserve fund.

On the other hand, when the cash flow is negative, it means that you spend more money than you earn, which means that you cannot make payments without using the reserve fund.

Many companies at some point in their lives experience negative cash flow, especially if they are companies marked by seasonality. Of course, just because it is something that can happen doesn't mean you can't do anything to prevent it.

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Ways to improve your company's cash flow

To improve your company's cash flow you should focus on the money that comes in and goes out, if you have already taken the step of tracking this, great! You are one step ahead. If not, it's the first thing you should do.

Here you have the keys to reduce your expenses, increase your income, how to increase the price of your services, analyze your clients and much more.

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Keep track of your finances

Knowing your income and expenses is essential, so you can track your cash flow. It is recommended that you review these financial movements every week. Then, you can make a cash flow forecast, how? Review which bills you must pay that month, purchases and expected expenses.

In this way, you will be able to know when money leaves and enters your company, so you will know when there is excess capital and when there is not, to know, in the months of less activity if you have enough money to cover your expenses.

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Reduce your expenses

Review your operating expenses, those ordinary expenses of a company when it carries out its main activity, and see where you can reduce costs. Some ideas to reduce operating expenses are:

• Check your internet, telephone and software contracts, perhaps you are paying for services that you do not use.
• Check your inventory and machinery, if you have products that you don't use, sell them. You will have more work space and you will obtain benefits.
• If there is something you need, consider renting it, perhaps it is of extraordinary use and you do not need to have it taking up storage space. If you decide to buy, look for cheap alternatives, but always keeping in mind that quality does not slow down the work of your team.
• Follow up with staff to find out if something is failing, inefficient, or not being resolved as quickly as possible. If you speed up the work, in the long term you will earn more money because you will be able to perform more services.
• Propose offers to your suppliers, if you buy large quantities they can surely give you part of the material or reduce the price of the total. If due to lack of space you cannot buy large quantities, you can collaborate with other companies, share space and pay less for the same raw material.
• Suppliers may also be asked for flexibility in payment, a longer term, or a discount for early payments. Try to contact several suppliers and choose the one that offers you the best conditions. Make payments coincide with your company's positive cash flow cycles if your activity is highly marked by seasonality.

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Increase your income

How to generate more capital?

• Offer new services: a good technique is when working in homes, there you can see the weaknesses of each house, if you see something that you can fix or improve with your company, offer that service to the customer (without offending them).
• Recover clients from the past to see if they are interested in working with you again.
• Implement regular maintenance services: some companies sign indefinite or long-term contracts with others to, for example, take care of repairs that arise, keep machines and filters clean, or maintain air conditioning systems. This attracts customers and serves as a loyalty plan.
• Collaborate with other companies: For example, if a cleaning company detects that the climate system in an office is broken, it can recommend your climate installation company for repair. On the contrary, if you finish a job and see that a thorough cleaning is needed, recommend that company.
• Take seasonality into account: knowing what stages you work in more or less is essential to plan your workers' schedules, short-term tasks or reduce costs. It can also be useful for you to take advantage of certain times of the year to offer new services, for example, in summer you can provide air conditioning filter cleaning services. ‍
• Do not underestimate advertising: announce everything you do and also the new services you promote, being known is essential for them to hire you.

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Increase the prices of your services

Price is not the only thing that matters to your clients, quality service is always valued. In addition, offering quality services improves your reputation and makes you more recommended. But how can you raise the price without losing customers?

• Inform your clients in advance: allow them to get an idea of ​​the extra cost that the service will entail and make decisions about it in good time. It is a way to look good to them and let them know that, above all, you take them into account.
• Justify the increase: this way you will make them more involved in your company and make it transparent and natural. If the profit margin increases is one of the reasons, you can explain it by explaining the changes that the service or product has undergone to justify it.
• Improvements in services: a change in the way you work, in the machinery you use or in the tools you work with can be the perfect excuse to increase the prices of your services, which with these new features will be faster, more modern and more satisfactory .
• Propose alternatives: at first customers may not take kindly to the price increase, even if quality increases, so, to avoid ending the contract with that customer, you can offer them a discount if, for example, they pay in advance.‍

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Analyze your customers

Cash flow is closely related to the payment method of your clients, for example, whether many pay in advance, whether they pay late or pay in installments. To know your clients you should review the history of each one and look for patterns. If you find several who always pay late or do not pay at all, consider the option of getting rid of them to open up to new ones.

For this, it can be very useful to implement a CRM Software. They serve to monitor and analyze relationships with your clientele. Within the same place and from any device you can review all invoices, estimates and contracts by entering the file of that specific client to find out about it quickly.

Learn more about CRM Software by clicking here.

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Tips for modernizing your billing

To update your billings and improve cash flow you must:

• Use an app to make your invoices: Many applications provide you with templates that make the process of making invoices easier. In addition, there are some that do the calculations automatically and send the invoice by email or WhatsApp. An example is the taclia app.
• The faster you invoice, the sooner you will receive the money: try to send your invoices right after the service is finished or when you have signed the estimate if a deposit is required.
• Be clear with the payment methods: clearly let the client know which payment methods he can use and in what terms to make them. If you are not clear, the client may think that he has complete freedom to make the payment. In these cases, being polite and clear is very important.
• Late payment fees: if there are clients who do not pay when you established when signing the contract, it is interesting that you charge them a late fee, this way they will be more responsible next time. In addition, it also makes you trust more in the deadlines you set with your clients because nobody likes to pay more.
• Reminders of unpaid invoices: if there are clients who do not pay when due, send them reminders every so often, always in a polite and friendly manner.
• If they don't pay, reduce the price: if you know that a client will never be able to pay for that service, it is better to pay little, you can offer them a price reduction to at least help increase your cash flow.

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Finance yourself wisely through the bank

In loans for SMEs, banks usually provide facilities, such as interest-free or low-interest loans that do not create a large additional debt and allow you to make short-term payments.

Keep in mind not to fall into large debts in the process of improving cash flow, this will cause you to have more monthly and longer-lasting expenses that, in the end, will make it worse.

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With the taclia app work better, save time and sell more, three fundamental pillars to improve your cash flow. taclia is the solution to manage your services and clients from a single place and from any device easily and without the need for prior experience.