Improving Cash Flow In Retail Using Technology
A business is always looking for more cash regardless of its form, industry, and type. A survey of merchants showed that 90% wanted to increase cash flow or wouldn’t mind it if this happened at the very least. This is completely shocking because we expected 100% to say that. Perhaps the rest were dishonest. What a rarity for a merchant.
Before we get into strategies to improve cash flow, let’s look at the causes of insufficient flow. There is one main one: customers delay or fail to make payment. And why does that happen? Usually, it’s because you’re not reminding them well enough. Here’s how to get clients to pay on time:
After you send your client a bill, make sure you follow up with a reminder. Send these out a few days before payment is due, on the actual due date and, if they fail to make payment, a few days later. And a few days after that. If they still haven’t paid, start calling them and don’t stop sending reminders. Many Retail systems feature built-in invoice reminders that you can send automatically.
It won’t hurt to charge a fee on late payments. A solid billing policy is key to successful billing. Choose a consistent time when payment is due (ex. due upon receipt, 10 days after receipt, 2 weeks after and so on) and always stick to it.
Clients who miss the deadline are charged a penalty and this penalty is enforced. This will improve your chances of getting your money and set you apart as a professional.
Be open and honest about the penalty when it comes to late payment fees. Tell your clients when and how much will be charged. You can include this in your terms and conditions section on your invoice. Look into what a normal late penalty policy looks like for your sector before you begin applying one.
Send Bills Right Away
If you don’t send bills, you won’t get paid. It seems obvious, but it’s not to many merchants, who automatically assume the client will be considerate. The quicker you send bills out, the faster the cash will come in, and your cash flow will improve by itself. Sometimes, companies don’t send invoices because their billing process is tedious. One solution to this would be switching to cloud-based accounting software. It will make bills easy to generate. The best POS systems( like Regit POS
) have features that speed up the billing process and increase your cash flow.
Give Your Customers an Incentive
Think about giving clients who pay their bills on time or before a certain time discounts or offering them promotions. If your bill terms stipulate payment is due within 30 days, offer a small discount to those customers who pay their bills in the first few days after receiving their item or service. This will serve to incentivize them. Clients looking for a good deal will be more likely to pay their invoices faster, which means you’ll get cash faster and improve cash flow.
Reduce Needless Costs
Analyze your profit and loss statement and your business costs. Ask yourself if they are really needed and if so, could there be a lower cost alternative. Think about your current expenses carefully and do away with unnecessary ones. Try to minimize the unavoidable expenses insofar possible. It may seem challenging, but your cash flow will improve when you learn to manage it and your expenses more effectively.
Streamline Your Processes
Another important aspect of managing your cash flow involves ensuring that your business is running as efficiently as possible. Focus on reducing time as well as expenses. Evaluate all of your current business processes and figure out if the current process is effective. If not, ask yourself if there’s any way to make it more so.
This might mean using accounting software to send bills faster or rethinking your staff’s inventory assembly process. You can spend less on salaries, get more done, and avoid overtime pay by using your time more efficiently.
Evaluate Operating Costs
Making a bigger profit is not all there is to managing cash flow. You also have to reduce the cash leaving your business. You’ll have more cash to spare if you are able to cut down on operating expenses. Here are some tips on how to do that.
Ask about Bulk Inventory Rates
Some suppliers might be able to provide discounts for buying inventory in bulk, especially those with whom you work well. Don’t hesitate to ask these suppliers if they have any deals because they might, and these could be worth taking advantage of.
Consider Leasing rather than buying Equipment
Unless you qualify for a working capital loan, it might be worth considering leasing equipment rather than buying. Lots of businesses don’t have the cash to purchase equipment. You lose the advantage of having the equipment as a fixed asset, but the reduced payments will help keep your cash flow in check.
If you Must Buy, Get More Efficient Equipment
One way to increase your company’s speed and efficiency is to buy better, more modern technology and equipment. Ultimately, you will save money because your wage expenses will drop. The downside is that it could be more expensive to buy the equipment initially. However, you might be able to take on additional projects or increased production. Both of these lead to higher cash flow.
Consider Invoice Factoring
The final option we can suggest is invoice factoring if you need cash urgently or the described strategies don’t work for you. Invoice factoring is where you sell the bills due to your company to another company in exchange for immediate cash. The factoring business gets a portion of that debt, sometimes a big one, but you’re not stuck waiting for payment anymore. You need to weigh the pros against the cons and make a decision for your specific business. Invoice financing and invoice factoring are both great cash flow solutions. The different invoice financing providers offer viable alternatives.