Cash flow problems are bad enough in a good economy. But they can be the kiss of death in a bad economy.
So if the recession has you scrambling to come up with money to pay your bills on time, then these four ways to cure cash flow problems quickly should come in handy.
1. Eliminate Unnecessary Business Expenses
Pull out your bank statements. Pull out your credit card statements. What expenses do you notice?
For the biggest return on investment, look for recurring monthly expenses you can cut.
There are often multiple business tool subscriptions, newsletter subscriptions, and software subscriptions in every business.
And probably 5% to 15% of these are no longer being used or serving their original purpose. Identify those and cancel them immediately.
This little exercise alone can increase your cash flow and save you a few thousand dollars a year.
Another easy way to cut costs is to replace expensive services with cheaper services. For instance, replace your land line phone with a paid Skype account. Or find a free open source solution to replace a paid solution.
Once you start researching, you’ll be amazed by how many good, affordable services are available to you. (Just ask your social network if you need help getting started.)
2. Invoice Faster, Pay Bills Slower
When cash is flowing out faster than it’s coming in, you have to do whatever you can to reverse the trend. Because ultimately you want the cash flowing out slower than it’s coming in.
One easy way to do this is to collect on invoices faster, then “float” your money.
So, for instance:
If you normally invoice on Net 30 terms, see if you can get your clients to pay sooner. Give them a small discount for paying the full amount up front or within a shorter time frame, say 14 days.
The faster you get paid, the better your cash flow will be.
The second step of the process is to keep your money as long as possible. So that means you will want to try to delay paying your vendors.
You can ask for terms or ask for an extension on a specific invoice. Or if you’d rather not negotiate with vendors, you might try paying with a credit card.
By paying with a credit card, you will automatically have an extra 25-30 days to pay. (Just make sure you have enough cash to pay off the balance at the end of the billing cycle.)
3. Outsource Tasks that Are Not the Highest and Best Use of Your Time
If you’re doing data entry when you could be doing work valued at $1,000 an hour, then that’s contributing to your cash flow problems.
You will never have time to work on your business if you’re always stuck doing menial work in your business.
You need to focus all of your time on doing things that maximize the monetary value of your skills. Any task that falls outside of your highest-value skill set should be outsourced to a reliable freelance worker.
For instance, if you’re a solo entrepreneur, you might hire a Virtual Assistant (VA) to take care of some of the mundane and tedious tasks you have to do on a regular basis.
Or you might contract with a company to screen phone calls, take messages, and book appointments. This alone could conservatively save a couple hours a week — freeing you up to do the things that generate more revenue and more profit.
4. Don’t Let a Good Month Ruin Your Cash Flow
If you’ve ever had a really good month in business, then you know how exhilarating it can be. You know how tempting it can be to go out and buy that expensive thing you’ve been lusting for.
Here’s a piece of advice: Don’t buy that thing.
Keep your emotions in check.
Set aside some cash when times are good so you can easily weather the bad months that may (or may not) happen in the future.
Unfortunately, this advice is not usually followed. Just look at the guys running big product launches. The influx of money causes them to do stupid things… like buy six-figure luxury sports cars and 10,000 square foot bachelor pads.
This is a huge mistake.
Because one good month does not a good year make. Past performance is no guarantee of future earnings. The economic conditions of today are not the economic conditions of tomorrow. Etc, etc, etc.
If you become financially over-committed in your personal life, it can very quickly bring down your business.
The most successful business men (and women) I’ve met are those who are willing to forgo a lavish lifestyle so they can make wise investments and keep their businesses running smoothly.
Some of the most wealthy are also the most frugal.
It’s the entrepreneurs who run lean operations — even when the cash flow is good — that survive tough times and achieve longevity in their respective markets.
Follow these four business optimization strategies… be intentional about implementing them in your business… and you’ll cure your cash flow problems quickly.
-Ryan M. Healy
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About Ryan M. Healy
Ryan Healy is a direct response copywriter. Since 2002, he has worked with scores of clients, including BoostCTR, Alex Mandossian, Terry Dean, and Pulte Homes. He writes a popular blog about copywriting, advertising, and business growth, has been featured in publications like Feed Front magazine, and is a regular contributor to WordStream.com, BoostCTR.com, and MarketingForSuccess.com.
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Point four was a big “ah-ha” for me. Might make more sense putting the audio at the beginning of the post, not the end.
Ryan,
Very good points here. Reminds me of the thinking of deca-millionaires that Thomas Stanley talks about in “The Millionaire Mind” (which, if you haven't read, I highly recommend. I think it's better than “The Millionaire Next Door,” which I thought was excellent.).
That does make one wonder if, in the interest of frugality, one should forgo that Sam Adam's Boston Ale for the less expensive Budweiser…. Then again, I'm not sure that's a trade off worth making…
- John
Ryan, I'd like to know the reasons why you thought it would be a good idea to try adding an audio option to your post?
Did you catch some buzz about audio and it's effectiveness?
Had a free trial with a new toy and thought, “what the heck?”
Why not a 'talking-head' youtube version?
Just curious.
PFH
Thanks for the tip, John. That's actually the part of the post I wrote first, then I decided to make it a full-fledged article. :-)
I read The Millionaire Mind years ago. Great book. It's still on my shelf next to Atlas Shrugged.
As far as beer goes, I simply can't swap a good beer for a light beer. If my options are Bud Light vs. water, I'll choose water every time. So for me, saving money in the alcohol department means just not drinking. :-)
I've had an Audio Acrobat subscription for years and I thought I'd put it to use and see how well my readers like audio/MP3 versions of my posts.
It's more personal and the MP3s might get passed around.
I plan to do more YouTube stuff, but my video skillz are terrible, partially because I don't have the right equipment. A 5-year-old laptop with maxed out RAM just can't render videos quickly at all.
Ryan,
Thanks for always being “spot-on” as we say here in the southern tip of Africa. At times one tend to neglect the basics and the obvious of life. Your points have been good reminders for me and my team.
Zama
Thanks for the compliment, Zama! :-)
Great advice Ryan – and as always, elegantly written. And your observations about product launchers is right on target. While there are a few guys who invest their product launch earnings wisely – I know of one who systematically paid off all his debt, including his house, with product launch proceeds – most are not great stewards of their profit windfalls (in my opinion).
Thank you, Ray. That would be really nice to be totally out of debt — kudos to the guy who used his money wisely (something I still need to get better at).
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