In a recent post, we discussed the concept of cash flow – what is it, how does it impact your business, and what are some ways to improve cash flow through some day-to-day business operations.
Now, we’ll go a bit more in depth on how to positively affect your cash flow through simple adjustments to the management of staff, assets, and inventory.
Staff expenses – such as payroll and benefits – have a direct impact on your cash flow. The pressure on cash flow for these recurring expenses is high, especially if times are a bit unpredictable, or big changes are coming to your business.
Here are a few ways to evaluate your workforce, and make some adjustments (many are often temporary):
Contracts – Evaluate contract or temporary workers, to determine whether these roles and expenses can be brought in-house. If your in-house staff has the capability to perform some or all of these tasks, you’ll be able to increase cash balances by consolidating this work, even temporarily. It is also beneficial to evaluate the functions of outsourced positions, and determine whether there is an immediate need to continue with this work. If it’s an option to postpone this work when cash flow balances are higher, take the opportunity.
Hours of Operation – If you have a brick and mortar storefront or place where you offer your services, consider whether you can temporarily reduce your hours of operation. This improves cash flow not only by saving on payroll expenses, but reducing overhead costs. If you can offer your products or services online or through a pickup/delivery service, this newly freed staff can be reallocated to fulfil customer orders, with savings to spare.
Assets are valuable items owned by a company. Depending on the nature of your business, assets may or may not be a relevant place to look when seeking to increase your cash flow.
Evaluate and collect a list of assets your company has. This can include vehicles, furniture, technology, intellectual property, land/real estate, and more. Generally speaking, assets are things of economic value that can typically be easily sold or exchanged.
Don’t eliminate assets that you will then need to rent or lease in order to keep operations going. Instead, look at what assets you have that could be sold and are not vital to your business operations.
Inventory levels have a direct impact on cash flow. Not only does a surplus of inventory equate to money that has gone out (payments made or owed to suppliers) and has not yet returned (through purchases by and shipments to customers), but it also requires space and labor to be managed, increasing payroll and overhead costs.
Here are some tips for evaluating inventory to improve cash flow:
- Keep an eye on sales history and projections, and make purchases accordingly. This also includes taking holidays and big spending periods into account.
- Do the best you can to buy and ship inventory as close to the time of sale as possible.
- Review your product set, and sales figures – is it possible to reduce your product offering and streamline it to fewer items?
- Being timely with markdowns will ensure that inventory moves through and isn’t aging on the shelf.
- If for some reason you find you have a surplus in an item that isn’t selling as well as you may have expected, or you’d like to clear some space on the shelves, consider offering package prices for multiple items or volume discounts to encourage sellthrough.
A general rule in retail is that 80% of your sales come from 20% of your products, so ensure you’re tracking and evaluating your sales regularly to understand your market. This will lead to more intelligent buying and stocking, a more streamlined offering, and a better state of cash flow.
Whether you are in an immediate need for increased cash on hand, or you simply want to fine-tune your business to ensure operations and cash flow are running well day-to-day, taking a clear look at staff, assets, and inventory will reveal some great spaces to make small changes for a big impact on your bottom line, and your peace of mind.
See our other articles in the cashflow series:
Improve Cash Flow by Managing Transactions and Finances Better
How to Improve Cash Flow by Managing Staff, Assets & Inventory
Improve Cash Flow by Optimizing Marketing & Tapping into New Opportunities