How does your cash flow look as we kick off 2021?
Has online purchasing demand driven your cash reserves through the roof? Or, has COVID made your cash flow wildly unpredictable?
Any scenario could happen. And it’s hard to precisely forecast what could happen throughout the rest of 2021.
Rather than wait and see, use these pro-active cash flow management tips:
1. Reduce Non-Essential Expenses
The number one expense item on any retailer’s budget is employee’s salary and benefits.
You may have to lay off some workers. But before you do that, see how salary reductions for those at various levels would affect your cash flow.
Layoffs are a huge drain on morale. Employees unequivocally know your business is in trouble if you have to let people go.
A salary reduction, on the other hand, doesn’t seem quite so bad. Plus, if your leadership joins in this effort, it sends a strong message to your employees that you’re all in this together.
That boosts morale long-term. And you’ll have better employee loyalty and performance.
Analyze your business for anything else that’s absolutely not essential for now. And reduce or eliminate it so you have the cash to make it through whatever COVID brings this year.
2. Increase Commissions on Higher-Margin Products
You need more profit with the same (or less) amount of cash spent. So, simply give your salespeople a higher commission rate on higher-margin products they sell.
This aligns their best interests with yours. It does require some additional accounting work. However, when you need to add more cash, tangible mechanisms like this make a huge difference in your bottom line.
3. Control How Customers Pay You
You still have to be reasonable here. You can’t build the payment terms completely in your favor.
But, most reasonable customers will understand that maybe you need to get more money up-front for a custom order or special project.
Perhaps before COVID you charged ⅓ down. Maybe now you make that number a tolerable increase to 50%.
Your customer has the money to invest in the special order or project because they’re approaching you to do the work.
So, it shouldn’t be a huge issue for them to increase what they pay only a little.
4. Stay in Tune with Your Front-Line Stuff for Revenue-Generating Ideas
Your staff have their finger on the pulse of your customers. They know what they like and don’t like.
What higher-margin products and services can you offer that you hadn’t before?
They say “necessity is the mother of invention.”
Well, COVID-19 certainly qualifies as a necessity.
Yes. It’s terribly stressful going outside of your company’s comfort zone. But, you’ve got to at least try. You may stumble on amazingly successful business ideas that separate you from the competition.
Cash flow management wasn’t easy pre-COVID. And now, it’s only tougher. But armed with these strategies, you can now create your own plan for making it through.