We would all enjoy increased cash flow in our business, right? However, this is confusing to many business owners who often have no idea of where to start.
The first step to improving cash flow is to make sure you are earning the right margins on the product or service that you provide. Examine the costs involved in providing your product or service and review how much you are truly making in gross profit.
The second step is to take a reality check of what is actually happening in your bank account. Consider how long it takes you to pay your suppliers, how long stock is sitting on your floor (product based industry), and how long it takes for customers to pay you. Reality checks like this are possible with a simple calculation by either your accountant or bookkeeper.
The third step is to monitor what is actually happening in your cash flow. Think about what is happening with your margins, monitor what is actually happening in terms of the difference in the time it takes for you to pay your suppliers and the time it takes for your customers to pay you. Also consider how long stock is sitting on your floor.
The more regularly you monitor these aspects of your business, the more you will see how these variables are affecting your cash flow.
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