After asking myself what the top 10 cash flow problems are that I used to experience in my own business or that I’ve seen in all the businesses I’ve coached, here are the ones I picked. These are 10 easy-to-implement, potent strategies to either reduce expense or increase income and send your cash flow worries out the window.
1. Don’t Discount
If you constantly discount, why have a regular retail price? With a 20% discount at a 30% gross margin, you’d have to sell 200% more than normal to maintain the cash generated from your sales! Discounting not only costs you money, it gives the impression that your normal prices are a rip-off or that your services aren’t all that valuable. In Psych101 we studied the research that proves that the more we pay for something, the higher we value it. Customers may also hold off buying, thinking an item that’s $100 today may only be $80 tomorrow. Instead of discounting, offer more value-added. Don’t set a precedent by discounting—if you do it for one person, others start expecting it.
2. Avoid Negotiating on Price.
When price comes up with customers it’s best to switch the conversation back to their needs rather than to haggle about price. This helps ensure you understand what they want and helps you connect your product or service to those needs. You can also describe why you’re unique and worth the asking price. Fall back on pointing out the value and benefits of your product to keep the conversation focused on the positive aspects of what you are providing.
3. Pay NO Overtime
By law, if you work hourly employees overtime you have to pay overtime. But there are ways to adjust schedules to avoid OT. Negotiate with your team members when you discuss their employment agreements. Rather than pay them overtime, ask them what’s important to them. Many may actually prefer flexible work schedules because OT puts them into a higher tax bracket. Any OT you pay significantly cuts into your profits! At a minimum, work OT costs into your base prices or charge customers a fee if they demand service after hours.
4. Know Your Staffing Needs at a Detailed Level
Determine when the work peaks and valleys are, then match your staffing hours to those peaks and valleys. Be sure work flow dictates how many hours you staff for versus what’s considered “normal” work schedules. Your peak work flow is often not strictly Monday-Friday, 8-5, therefore, your staffing shouldn’t be either. If you plan this well, you have people there only when you need them, you won’t have staff under-utilized (waiting for work) and you won’t have need for overtime.
5. Let Under-Performing Team Members Go
Too often business owners keep under-performing employees far too long. An employee who is either unable or unwilling to perform the job to the highest standard costs you tons of money. You’re not doing your business any favors by keeping them on the payroll and in fact, you’re not really doing the employee any favors either. Chances are, they’d be happier working for someone else but they don’t have the courage to make the change for themselves.
6. Negotiate Employment Agreements for Salaried Team Members
In order to attract and keep good people, you must offer them something worthwhile. Yet you should negotiate every contract as though it were a business deal. Find out what motivates each person—it might not necessarily be money. Try and reduce the base salary as much as possible while increasing the profit performance bonus. A salaried person’s pay should be tied to the value they create for your business whenever possible. This ensures that they’re focused on producing the outcomes that make the business successful. It also means that they’re not paid unless they’re creating that value – just like a business owner.
7. Team Incentives Based on Margins
Why should you be the only person concerned with margins? Your team members can assist you in boosting your margins, particularly if you make it worth their effort. So, offer them an incentive based on margins. Say, for example, you have standard and discount prices. Pay your sales team members a higher commission on anything they sell at the full price. All team members need is a clear understanding of what the margins are. Offer a larger percentage reward for sales made at full margin. Spell out the numbers—your sales team members need to know at what level their commission stops.
8. Reduce Duplication
By cutting down on double handling and unnecessary paperwork, you can save your company thousands of dollars. Take the time to look at your existing systems to see if there’s any area that contains duplication. Constantly audit your systems. Encourage team members to complain about duplication or wasted time spent on paperwork.
9. Allow Your Team to Buy Only with an Authorized Purchase Order
This way you can keep track of any money that’s being spent. It isn’t because you don’t trust your team, but more to ensure that your money is only being spent on bare essentials. This is crucial for proper planning and prudent accounting. Tell your team members that it’s not about trust, but rather a way of making them ask, “is this really necessary?”
10. Get Your Bills Checked
Don’t assume that your bills are correct. Often you can save money by checking them to see if you’ve been overcharged. You must have someone check every bill and then follow up with any discrepancies. Take nothing for granted—even automatic debits you’ve previously authorized. Keep all receipts so you can cross-reference—you need to anyway for tax purposes.
If you’d like to get more of my cash flow strategies, you’re invited to my FREE webinar, on August 29 at 11:30 am EST, to help you learn EXACTLY what you need to do to implement a cash flow strategy that works!
Register NOW The CEO’S Guide to Strong and Steady Cash Flow
This could be the best hour you spend on your business in 2012, and it’s FREE! In just 60 minutes you will…
- Discover in even more depth how to implement solutions to the TOP 10 cash flow mistakes and send your cash flow worries out the window
- Get my 7 fast-acting, sure-fire ways to find and reduce unnecessary expenses while you watch your net profit skyrocket
- Find out how to make more $ from each customer… this formula is the most important customer strategy anyone can learn
- Discover how to put an end to “rollercoaster-income” once and for all
- Get a list of expense reductions that you can do quickly and that will increase your net profits—overnight!
Don’t miss it!
Register NOW The CEO’S Guide to Strong and Steady Cash Flow