How to Manage Cash Flow in Your Business

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How to Manage Cash Flow in Your Business

What is Cash Flow Management?

Cash flow management is an integral aspect of maintaining a successful business. The aim of any business is to increase its profit margin, but even the most meticulously planned business franchise can be hit with cash flow problems. This can arise from improper management of finance, operations or investment activities. By maximizing your business’s cash flow potentials, you can increase the profit margin, meet targets quickly and reduce operational cost.

How to Improve Cash Flow

Cash flow is a combination of cash inflows and outflows. Cash inflows depict when more cash is flowing into your business than its leaving and is essentially known as positive cash flow. If the reverse holds for a business, that is, more cash is leaving the business than its making, it is called a negative cash flow.

Bear in mind that negative cash flow doesn’t necessarily mean a business is running out of cash. It simply means the business is depleting its cash reserves. Businesses can improve their cash flow faster if they simultaneously combine improvements to cash inflows and outflows.

1. Plan for Future Cash Needs

Keeping accurate and detailed accounting records provides an avenue for you to build a forecast for your business based on previous results. This is why it’s important for a business to review its cash flow every month. 

By being proactive with cash flow records, you are able to predict with a certain degree of accuracy your expected income and help prepare for downturns or seasonal trends. Keeping records can help you evaluate when you will be in need of cash for extra expenses and will help you plan accordingly.

2. Conduct Customer Credit Checks

Customer preference differs when it comes to payment methods. While some customers may prefer to pay with cash, other customers may prefer electronic means. If the latter is the case, ensure to conduct credit check worthiness before signing such customer up. A poor credit score means that your payments will be delayed, and late payments will hurt your business’s cash flow. One way to mitigate the effect of late payment is to set it up with a high interest rate which improves cash flow. 

3. Offer Discounts for Early Payment

Customers love incentives, and you can capitalize on this to improve cash flow. Offering customers discount for early payment essentially creates a win-win situation for both the business and the customer, because early payment means more cash at hand to perform other necessary functions. However, offering excessive discounts can eventually reduce your profit margin, thereby having a negative effect on your business. Be careful about excessively discounting products or services, even if it improves your cash flow. 

5. Pay Suppliers Less

One way to maintain and improve cash flow is to establish a cordial relationship with suppliers. By communicating regularly with suppliers, you create a chance of getting improved terms. Convincing your supplier to extend payment terms beyond the regular for large purchases will manage cash outflow.

6. Outsource Certain Functions

The world of freelancing has had an impact on how we do business tasks. Gone are the days when you needed to employ full-time staffs. You can simply outsource certain functions to save cost. 

Typical examples of business functions that can be outsourced include IT Management, human resources, accounting and marketing functions. In general, outsourcing can save your business by cutting down on expenses, help increase your business efficiency as well as offer a flexible staffing model during bear-runs of the business cycle.

Creating an improved and healthy cash flow for a business is a result of efficient business operations management. The above steps work hand in hand with making the right decisions regarding marketing strategies, customer acquisition, customer service as well as product or service development.

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Why Stanbuzz?

Last year, about $380 Billion was spent on online advertising by brands all over the world. Up to $150 Billion of that money did not generate the desired result for the brands that paid for them. That’s a lot of money spent without returns.

To put it into perspective, Nigeria’s 2020 budget was $35 Billion. So people wasted up to 4 years' worth of Nigeria’s budget on ineffective advertising in 2020 alone.

If nothing changes, by 2024, $240 Billion will be wasted on advertising, without getting results. Money gone like that, pooooof!

That’s why we have come in to save the day.

We asked ourselves, “what can we do to reduce this money being wasted on adverts without results?”

A lot of things came to our minds, at least 20 solutions. But can we really offer all those 20 solutions from day 1?  No.

So we said, “even though we will work on all the solutions to reduce this money being wasted on advertising, we can start with 3 things and then extend to other things.”

1. If people learn how to market better, they will waste less money - a lot of people waste their advert budget because they have no knowledge about how best to allocate it to get results. So we thought, “let’s start from here; let people be able to enrol into our world-class trainings that can teach them practical ways to be more effective with their adverts”.

2. If people can find trusted experts to market for them, they will waste less money - Some people don’t really want to learn to market by themselves, they just need a good, reliable, trustworthy person that won’t rip them  off and knows their onions. We said, “if we can help clients find those people by screening them and being sure of their proven abilities, then we can make advertising more efficient.”

3. If people can find experts to advise them, they will waste less money - Some people just need a one-hour call with an expert to get super clarity on their marketing strategy. Some may just want an expert to spend some time with their marketing team, and we know this will help reduce advert spend waste.

But that’s not all. There are many more things we are working on; because to be able to achieve our goal of reducing advert spend inefficiency, we need to consider several factors as it is not a one-size-fits-all operation. We are aware of this and are working on it at Stanbuzz.

Our goal again...

To greatly reduce advert spend inefficiency and to make the internet’s advert experience so much better.