Many companies and small businesses continue to experience serious cash flow issues. Over 70 percent of all business failures are due to cash flow problems. Cash flow is an important aspect of the business that deals with managing day to day financial transactions that includes both income and expenditure. In our current economy, any mistake will likely result in serious cash flow issues.
The great news is that even if you have serious cash flow problems, there are some really effective strategies for improving your bottom line. One way is to sell your way out. In other words, increase your sales, to bring more cash into your company. Is this easy? No but it is the overall best solution, if you doubt this, just ask any qualified fractional CFO.
If you are not familiar with that term yet, you soon will be. It is one of the fastest growing outsourcing solutions that you can employ to give your organization a marketplace advantage. Solving your cash flow issues is the perfect problem for a fractional CFO to solve because that is what they are trained to do! Having this key person on your team might just be the secret weapon that keeps you in business. A fractional CFO is someone with specialized training and experience in running the financial side of a business. No, this is not your bookkeeper or your tax accountant although a fractional CFO will review your books and your taxes to make sure that the latest success strategies have been used and that you are paying the lowest possible legal rate on your taxes.
The term fractional CFO means what it says, you only pay a small fraction of what you would normally pay to employ someone of this caliber because you are only using a fraction of their time, as you need it. This is similar to what you are already doing with your lawyer or your doctor. You only pay for what you need and what you use. However your return on investment is amazing!
If you employ a truly great financial mind, similar to a CFO in any large company, your fractional CFO will show you how to increase your sales while delaying many of the related payments to suppliers, sub-contractors, and other entities. Your fractional CFO can usually get these and other payments deferred by negotiating customer credit, giving you the opportunity to increase your sales and your cash flow. Increasing your new sales cash receipts while delaying your cash payments is only one of many benefits that a well trained fractional CFO will help you to accomplish.
The key strategy here is to bring in the cash as soon as possible, while holding it as long as possible and balancing the value of the cash against any cost of holding the funds. This way your cash flow becomes stable and your ability to manage your company becomes more efficient.
So what are some of the proven strategies for increasing cash flow and sales?
1. Offer your customers a term discount, such as 2% net 10 days or 1% net 5 days, to encourage them to make payments quicker to get the discount.
2. Before delivering goods or services, do a credit check of your customers to avoid defaults by customers with bad credit. If they are not paying other vendors they do not mind not paying you.
3. Improve your monitoring and evaluation techniques for your business by installing tracking systems in areas that affect cash flow, such as inventory management and supply and procurement.
4. Ask your customers for cash or payment methods that can be easily transferred, such as credit cards and online banking payments.
5. Deliver goods faster, to receive early payments and profit.
6. Consider inventory financing or leverage factoring for your orders to improve temporary cash flow problems.
7. Consider customer satisfaction surveys to learn how to better serve your customers. A great tool for this is called Survey Monkey and you can learn more at; http://www.surveymonkey.com
8. Send out press releases to the media about your products.
9. Do article and email marketing that can drive traffic to your website.
10. Upgrade your website to use a video sales presentation so that you have a professional salesperson selling for you 24/7/365.
A well trained fractional CFO will help you to accomplish this and a whole lot more! There is an old saying that goes, “You do not know what you do not know!” When it comes to running the financial side of your business, no truer words were ever spoken!
Dale R. Schmeltzle, CPA is the Managing Partner of CFO America, LLC. http://www.CFOAmerica.net Mr. Schmeltzle has served as the CFO for start up to Fortune 500 companies. He is the author of the “Business Success Blueprint,” get a FREE COPY at: http://www.CFOAmerica.net or write Dale@CFOAmerica.net