Running your own business is difficult. Now throw in the fact that it is still growing and you may be low on cash. Fortunately there are several ways to keep your business operating at full capacity without selling off your assets or taking out a loan. When it comes to running a company, it is all about timing and cash flow.
In the case that your business runs on sales and you are employing a sales force, there are several tactics you can implement in order to improve cash flow. First of all, a sales person should not receive commission until payment has been received from the client. This does not only improve your cash flow, but it forces your sales people to have a close relationship with your clientele.
If you are not operating under net terms, this type of payment structure should most definitely be implemented. Additionally, there should be net terms for sales that involve commissions. If a customer hasn’t paid in a certain number of days, the sales person should forego their commission.
For net terms that look like they may exceed the term, consider a system of invoice factoring. Take the load off of your business in terms of collecting and keep your finances fluid with invoice factoring. A system of collections can come off as aggressive to your customers so this is a great option and gets you a supply of cash almost immediately.
Manufacturer representatives are a great alternative to employing your own sales people. They work on pure commissions and their pay structure is usually pretty reasonable. Saving on base salary and benefits may well be worth the cut to your own sales staff, at least until your business can get back on its feet.
Inventory is a great source of fast cash in tight times. It is important to have a detailed log of what is in stock so that if you need to release some of it you can unload the items that are low in sales volume.
Running a business is difficult, but having a big picture look at operations can reveal a lot of opportunity for savings that you may otherwise have missed.
