I asked myself what the top 5 cash flow problems are that I used to experience in my own business. Here’s what I came up with. These are the ones I had to solve in the early years of my own business and they’re also common ones I help my business coaching clients solve. These are 5 easy-to-implement, potent strategies to either reduce expense or increase income and get your cash flow on a good track for this year.
- Don’t Discount
If you constantly discount, why have a regular retail price? With a 20% discount at a 30% gross margin, you’d have to sell 200% more than normal to maintain the cash generated from your sales! Discounting not only costs you money and hurts cash flow, it gives the impression that your normal prices are a rip-off. Worse still, it conveys that your services aren’t all that valuable. In Psych101 we studied the research that proves that the more we pay for something, the higher we value it. Customers may also hold off buying, thinking an item that’s $100 today may only be $80 tomorrow. Instead of discounting, offer more value-added service or add-ons. Don’t set a precedent by discounting—if you do it for one person, others start expecting it.
- Avoid Negotiating on Price
Don’t let cash flow suffer due to a lost sale. When the subject of price comes up with prospects it’s best to switch the conversation back to their needs rather than to haggle about price. You can’t honestly discuss how the price connects to the product or service they need until you deeply understand what your client/prospect needs and wants. Once you enter into the topic of price, describe why you’re unique and worth the asking price. Fall back on pointing out the value and benefits of your product to keep the conversation focused on the positive aspects of what you’re providing.
- Pay NO Overtime
By law, if you work hourly employees overtime you have to, and should, pay overtime. What I’m talking about is adjusting schedules to avoid OT. Payroll is one of your biggest drains on cash flow so keep a continuous eye on controlling payroll costs. Negotiate with your team members when you discuss their employment agreements. Rather than pay them overtime, ask them what’s important to them. Many may actually prefer flexible work schedules because of family, hobbies, or because OT puts them into a higher tax bracket. Any OT you pay significantly cuts into your profits! If circumstances dictate occasional OT, work OT costs into your base prices or charge customers a fee if they demand service after hours.
- Check Your Bills
It’s amazing how many incorrect bills I’ve discovered in my own business and in those of my business coaching clients. Don’t assume that your bills are correct. Often you can save money by checking them to see if you’ve been overcharged. You must have someone check every bill and then follow up with any discrepancies. Take nothing for granted—even automatic debits you’ve previously authorized. Keep all receipts so you can cross-reference—you need to anyway for tax purposes.
- Reduce Duplication
By cutting down on double handling and unnecessary paperwork, I’ve seen many business coaching clients improve cash flow by thousands of dollars. Take the time to look at your existing systems to see if there’s any area that contains duplication. Look for instances where the same document is handled twice or the same step is being taken by two different employees. If Employee A routinely completes the same process in less time, find out why and train the others on the better process. Encourage team members to complain about duplication or wasted time spent on paperwork.
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