Imagine a situation where you need to make immediate payments to your suppliers, but don’t have cash in hand to make these payments. On paper, you may have this money tied up in the form of receivables but if you don’t have the cash with you to make a payment, your business will suffer.
Positive cash flow is essential for the long term survival and growth of your small businesses in New Zealand. It will enable you to make payments to suppliers in time, buy necessary equipment, and deal with any business emergencies that arise.
Without being in control of the cash flow for your small business in NZ, you can’t hope to thrive as a business in the long run. Here are some changes you can implement for your small business in NZ to stay on top of your business cash flow.
Expand your sales market
Expanding your sales market will help to increase the customer base for your products or services. You could consider adding new products or services to your existing range so that you can give customers more options to choose from.
You should also explore various forms of marketing, including digital and social media marketing to market your products to a larger audience. Take advantage of the shopping features available on these platforms and use landing pages to make the shopping journey easier for your customers.
You can even offer bundle items or recommend related products based on what the customer has already chosen. This can encourage them to buy the related product when they’re shopping. You can also tweak the messaging for the same product so that it appeals to different age groups.
Remember to include a special offer for your loyal customers to encourage them to shop again and build loyalty.
Increase your prices
Do you think increasing the price of your products seems like a bad decision? You could be mistaken. The price of your product should allow you to fairly compensate workers while also making a profit. If your price is too high however, people will end up buying products of a lower price from a competitor.
The key to increasing your prices wisely is to do it in the right margin. Your customers are likely to think that a slight price increase signals higher value. They will end up buying more products and supporting your business when they feel that your products are worth it.
Do some research on what your competitors are charging before increasing your price.
Time your invoices right
If you want to bring cash into the business, you have to raise invoices. The sooner you do this, the sooner you get paid. If you’ve got a slow and time consuming process for raising invoices, it’s time to make changes.
You can use software programs that automate this process or employ workers to handle this. It’s imperative that your invoices are sent out as early as possible so that you can collect cash on your receivables more quickly.
Make changes that encourage timely payments
Make it easier for your business to receive cash on receivables by putting certain practices in place. Once you send out your invoices, send reminders to encourage your customers to pay in time. Software systems will do this automatically for you.
How can you encourage timely payments from customers? Offer them discounts. Make sure that your customers know that there is a certain discount percentage that they can benefit from. This is only if they make payments on invoices before the due date. Give higher discount percentages for payments made much in advance of the due date and lower discount percentages for payments made closer to the due date. This way, you will get paid faster.
Apart from discounts, you should also levy penalties to encourage your customers to make timely payments. Those who fail to make payments within the due date will have to pay the penalty. List the penalties clearly in your agreement with a client so that there is no possibility of confusion later on. Make sure the penalty is in tune with the industry you operate your business in.
You can also think of a credit control system, where part of the payment has to be made upfront. This will ensure you have cash coming in.
While speeding up the recovery of receivables is important, you should also delay payables as much as you can without suffering any penalties. Try to re-negotiate your existing contracts to include this with your suppliers.
Re-evaluate operating costs
Look for ways to lower your operating costs and time involved in business processes. This can be by leasing equipment instead of having it as a fixed asset of your business. You could also buy more efficient equipment and improve productivity. Making use of software programs and streamlining business processes will also help you lower operating costs.
Liquidate old inventory
Instead of wasting money carrying out repairs and maintenance for old, obsolete inventory, sell them. This will give you cash in hand and allow you to use the money to invest in something more productive for your business.
If you’re planning to implement these steps, good job. But you’re still missing out on some crucial protection. Consider getting insurance for small business for added protection. Small business insurance will be a savior to your business if you find that problems arise in operating your business in the long run.
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