There are numerous actions a business can take to make sure earnings meets cash demands, and ensure the organization stays in a financially solvent plus viable condition.
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Know Your Precise Income Planning Target
Knowing just how much income the business needs to bring in on a weekly or monthly basis to meet all the income demands is simple in case you create an accurate cash flow budget. Price range is a calculation of how much the company needs to operate, to pay for present and future expenses, and to pay off financial debt. The calculation also reveals the particular income planning target for the firm. I often find a business owner under-estimates their income target by 13% to 25% based on the industry they may be in. Creating a cash flow budget is indeed a eye-opener when they realize they have been operating on a number that is too low which alone created a large part of their cash flow problems.
Set Sales and Collection Targets and Quotas
Keeping a weekly meeting with sales plus collection teams where targets and quotas are set based on the earnings planning target can immediately improve income. Without a specific demand put on the individuals in the teams, and the managers of the teams, they have simply no target to work toward. Additionally the company owner has no method of evaluating the production from the team members and their managers.
Understand When To Raise Your Prices
How long has it been since your business elevated its prices? The cost of doing business rises 8 to 12% a year as well as your suppliers are undoubtedly raising their prices they charge your business, occasionally disguised as a hefty added upon “fuel charge” for delivery of the products to your business. Supplier cost increases need to be passed on to your clients.
Customers are smart, and they know your prices from your suppliers are getting up. Heck, the cost of a gallon of milk has gone up a minimum of 30% in the past year alone, so consumers are aware things are getting more costly. If your prices stay the same year within and year out, your customers will start to wonder if you are desperate for business. Especially if your competitors are raising prices and you are not.
Consumers can sense any time a company is confident and particular, and when they are desperate and starting to view customers as a wallet walking in the door, rather than a person to be served with great customer service.
Suggestion – When you do raise your prices, it is better to do it in small amounts more often than in one large jump that will shock your current customers. In case you raise prices in small amounts, your customers will justify the increase by saying to themselves, “Well everything is getting more expensive, so I am not surprised. ” So you increase prices a little and it validates the conversation the customer is already having with themselves inside their own heads, and it eliminates the shock value.
Market your Products and Measure Your ROI
It comes with an old advertising adage I discovered from an advertising guru in the early 1970s. He said, “When times are good you need to promote, so when times are bad you need to promote even more. ”
That is still correct today. A business owner often makes the mistake of cutting marketing and promotion spending when there are cash flow issues. They treat advertising as a discretionary expense, and it is anything but that. Marketing and promotion is mandatory, especially online internet marketing.
Most consumers possess a computer or two at home, however they are walking around 24/7 with a computer in their pocket or purse. It can called a cell phone, and they use it to search the internet for a place to buy whatever product or service they want or need at the moment they decide to buy it. In case you aren’t talking to your current and prospective customers using consistent promotion, I assure your competitors are talking to them, and then your potential customer is more than likely going to buy from your competitor.
Measuring the effectiveness of the advertising dollars you spend is critical. Knowing that internet marketing takes time to build traction is really as important as knowing that a postcard mailing will take a couple of weeks to produce measurable results. Just because something doesn’t appear to be working doesn’t mean it won’t work. Sometimes it is a time factor, and other occasions something is slightly wrong with the information, or the target market demographics are not focused enough.
Don’t Be Afraid To Waste A Customer
Some customers are never-satisfied and will constantly delay their obligations to you, or try to negotiate large discounts based on some strange value they have on their importance to your company. They forget that you are in business to make a profit, and you have every right to make an adequate profit that will help you meet the economic goals you set when you opened your company. Nobody opens a business just to pay out their bills and make their suppliers wealth, right?
Don’t be so desperate for a sale that you allow yourself to deal with a customer would you not appreciate the quality of your products. Maintain a standard of quality for the customers and you will attract only high quality customers who can and are willing to pay out you promptly what you deserve to become paid.
Don’t Bet Your Monetary Future On One Client
Never have a client who owes you more money than you can afford to lose. Bankruptcy filings are rampant these days and you no longer want to be in a position of having to eat a loss that causes your business to go throughout the tubes. Work to have many, several good quality customers who pay consistently. Make non-payment punishable by placing them on permanent COD conditions.
Set Firm Financial Policies That will Speed Up Cash Flow
Setting financial guidelines that can speed up cash flow are very effective, especially when your sales team encounters a customer requesting special concessions. Some financial insurance policies to consider are:
Getting Paid a Percentage Or The Entire Amount Up-front
Split up Payments For Large Jobs
Be Very Selective When Offering Payment Terms
Make It Financially Painful Regarding Late Payers
Putting in the correct income management actions and firm financial policies can quickly and effectively solve the most pressing cash flow problems.