One of the most frequent questions business owners ask me is how to fix cash flow problems.[p]
To answer this, I asked myself what the biggest cash flow problems were that I used to experience in my own business. Then I listed the biggest cash flow problems I see with my business coaching clients in several different industries: manufacturing, law firms, veterinarians, construction companies, computer consultants, and more.[p]
What I found was that if you’re experiencing cash flow problems, it’s probably one of these five areas – and here’s what you can do about them.[p]
1. Don’t Discount
Discounting to get the sale is so tempting! But there are so many reasons not to. For example:[p]
- It can give the impression that your service or product is not very valuable.
- It can convey that your normal prices are inflated.
- Customers may start expecting discounts – this can cause them to delay purchases, thinking an item that’s $1000 today may only be $800 tomorrow.[p]
Instead of discounting, try offering more value-added service or add-ons.[p]
2. Avoid Negotiating on Price
When you’re looking at how to fix cash flow problems, it’s not always about reducing expenses. You need to increase sales as well. When the subject of price comes up in the sales process, try switching the conversation back to their needs – instead of haggling over price.[p]
The truth is, you can’t honestly discuss how the price connects to the product or service they need until you deeply understand what your client/prospect really needs.[p]
But when it’s time to discuss price, describe why you’re unique and worth the asking price. Rely on the value and benefits of your product to keep the conversation positive.[p]
In other words, negotiate on value instead of price.[p]
3. Avoid overtime work
By law, if hourly employees work overtime you have to pay them overtime and of course, you should. What I’m suggesting here is adjusting schedules to avoid OT in the first place. Any OT you pay significantly cuts into your profits.[p]
Track and document how many hours the work requires each hour each day and create a work schedule that matches it. Try letting employees create their own schedules within general parameters. An added benefit is that they’ll buy into and feel more ownership of it.[p]
If your circumstances dictate occasional OT, paying OT will cut into your base price. If it’s unavoidable, consider adding an additional charge if a customer demands service after hours.[p]
4. Double-Check Your Bills
It’s amazing how many incorrect bills I’ve discovered in my own business and in those of my business coaching clients. Don’t assume that your bills are correct. Have someone check every bill and then follow up with any discrepancies. Especially watch those automatic debits you’ve previously authorized to make sure you still need and want the service.[p]
5. Reduce Duplication
By cutting down on double handling and unnecessary paperwork, I’ve seen many of business owners save thousands of dollars. Take the time to look at your existing systems to see if there are any instances of duplication. For example, look for instances where the same document is handled twice, or where the same step is being taken by two different employees. Better still, encourage and reward team members who uncover duplication or wasted time. Your employees know how to fix cash problems too!