Cash Flow is King
By: Paul Paris
One thing a tough financial market can do for the better is force you to take stock of your business and to be creative with new business strategies. And while it's critical to examine the bottom line and cut costs, it's just as important to focus on new growth, evaluate your company's services and products and pay attention to your customers' needs in ways that you may have overlooked in stronger times.
Below are some tips to keep in mind to help you focus on bringing money in. By growing the top line and increasing cash flow you may create a little bit more breathing room.
Keep Your Eye on the Top Line – Now more than ever is the time to be laser focused on increasing sales no matter what business you are in. Here are a few specific suggestions to help increase revenue: 1) Take time to review each customer relationship to see if there is a chance to cross sell other products or services. 2) Starting a new line of business may be tough right now, but stay aware of the marketplace as often the best new opportunities present themselves in times like these. 3) Target market your services to the narrow band of customer that you service best. Broad marketing attempts may prove less fruitful than a short list of qualified prospects that need your product.
Monitor Your Accounts Receivable - Keep tabs on your customers to make sure they're paying their bills on time. If you manufacture, distribute or sell products, make sure your invoicing is thorough, including all items, shipping and handling and other costs. And whether you're a product or service driven company, make sure your fees are being invoiced in a timely manner. Balances over 30 days should be tracked closely. Look carefully at your biggest accounts (or ones that pose risk) to determine how delinquencies in their payments will affect your profit. Make sure due dates are clearly marked on all invoices and don't wait until payments are overdue before you start collection efforts. Remember, the time you spend chasing customers for payment is time you lose on new business.
Focus on Cash Flow – Measure your cash needs as often as possible. Using your annual budget as a guide and more detailed daily or weekly reports to gauge your current status, determine whether you have enough cash available to meet your short term needs. Do you have enough cash for your business to function normally for the next 90-120 days?
Cash Stability - Make sure your bank accounts are fully insured. As of October 3, 2008 the FDIC temporarily increased its insurance to $250,000, and there are ways of protecting significantly more than $250,000. While this won't help your current cash flow, it will help protect your reserves in case you need them.
Stay Up to Date with Your Lenders' Needs – Communicate with your bank now to discuss how your business is doing. Make sure your company is compliant with any covenants and that loan and credit line terms have been met. If you need to negotiate later you may have better results in the long run by staying in touch with your banker now.
Evaluate Your Inventory – Slow sales mean it's time to review your inventory carefully. Are you stocking products that consistently aren't selling? If so, it may be time to cut the dead weight so you can focus on the products that are moving. Good products with good profit margins are where you should be spending your time.
Maintain Superior Customer Service – While you may not see a spike in new business, the last thing you want is to lose the business you already have. Keep your existing client base happy by maintaining superior customer service. Tamara Greenberg, AGH Director of Career Development notes, "This year we provided company wide customer service training for all our associates and we recently held a customer service Webcast to maintain that service focus as we enter into the busy season." Challenging market conditions should be viewed as an opportunity to strengthen relationships as well as help clients navigate successfully through uncertain economic times themselves. Look at your customers and analyze their demographic or buying patterns so you can continue to meet and exceed their expectations. Always follow up after a sale with a phone call, personal email or handwritten note. And if something's wrong, take care of it – Immediately.
Take Advantage of Social Networking for Referrals – If you're looking to increase your company's visibility without spending more on marketing, maximize your online presence by participating in social networking sites such as LinkedIn, Facebook, Twitter and Plaxo, just to name a few. Most offer free memberships, the opportunity to spread the word about your company to potential clients in a casual online setting, and most of all, a chance to keep your finger on the pulse of technology. "Social networks have been very valuable both internally and externally," says AGH Director of Public Relations, Michelle Robinovitz. "Almost half of the AGH staff is on LinkedIn or Facebook. It builds camaraderie in the firm and connects us professionally inside and outside the office." Blogging is also a smart and free way to position your company as an expert in your industry, by offering advice and tips on a regular basis to consumers. Try adding a free Blogging tool such as Blogspot or Wordpress to your company's website. The more you blog, the more your company's keywords get picked up and spread around the online world.
Keep Your Team Motivated – While you may not be able to offer big bonus checks, extravagant holiday parties or gifts this holiday season, you can and must continue to let your team or sales staff know that they're valuable. Turn slow sales days into brainstorming meetings where their ideas are the focus. Consider substituting holiday flex-time for office parties to allow staff to attend children's plays or school festivals without taking time off. It always benefits you to create an environment where you're interested in your employees as a person, in addition to what they do for your company. Drive and motivation come from within. And a team that feels important will continue to work hard for you and build your business, especially in tough economic times.
*Stay tuned for Part 4 in our Your Business and the Economy series where we'll focus on the best ways to ‘Sweat the Small Stuff' and save where you never thought possible.