Yes! Then you are not only the one plagued by this question. Many SME owners are struggling with cash flow problems. This blog will help you find the answer. Every year approx. 60% businesses that arrive with a bang at the marketplace, fizz out with fast. Poor guys lose money heavily, and eventually are out of the business. You definitely don’t want to be one of them.

The critical aspect that differentiates successful businesses from the struggling ones is the way SME owners manage their money. So here are some tips to help with your cash flow problems.

In our work as advisors to SMEs, we have identified 7 ways businesses lose money. Alongside, we will provide you with tips as to how to avoid losing money.

MARKETING

Small businesses often get too caught up in trying to create a big business image.

Don’t spend millions on various image building and marketing efforts.

It is more important to build a solid and consistent brand image.

Start small and simple but be consistent.

Nothing sells your products and services better than excellent product and great customer service.

OUTSTANDING IN THE MARKET

It may be tempting to grow your business by offering large and long credit.

This credit time and amount both affect your cash flow very badly.

Remember: cash flow is more important than profit. Cash flow has profit built in it. Profit has no cash built in it.

Cash is real. Profit is partly real partly notional.

So if need be sell at a low profit but in cash.

INVENTORY

The problem begins when you block in too much of your capital in stock.

This could lead to inextricably cash-strapped situation.

Plan ahead for smooth inventory movement and cash conversion.

Learn to tweak your inventory levels that are just right to meet your sales needs, and employ strategies like Just-In-time, etc. for optimum results..

OPERATIONAL EFFICIENCY

A business has to utilize its resources well to avoid cash flow problems.

Study the current operating policies, processes and procedures of your business and fine tune them to run at peak efficiency.

Establish performance metrics for each KRA and ensure you monitor them periodically.

CORE COMPETENCY

Stick to what you know best.

Avoid getting tempted to diversify into various streams.

Stay focused on your areas of core strength.

By focusing on a fixed range of products and service offerings, you will be able to have more control over the quality and productivity of your business.

You can also consider subcontracting specific sections of your services or manufacturing, to further trim down the costs and improving overall efficiency.

HUMAN RESOURCES

Hiring and training employees is a costly affair. It takes a lot of time, effort, and money – all these are most important resources.

Know the productivity cost per employee and maintain it – do not over staffed or under staffed.

Stay focused on your areas of core strength.

Apply same principle to ensuring the right job fit as well.

Monitor your attrition rate by offering KRA based incentive. This helps to keep it down to a minimum.

TECHNOLOGY

Investing in tools like CRM/ERP is a must these days if the stage of business justifies it.

Many a tech tools can be an expensive investment and may not entirely justify the stage in which your business is in.

Your business isn’t the place to explore gadgetry.

Get scalable and flexible options, which can grow with you over time.

Generally speaking: Operating a small business successfully requires you to be vigilant. You need to identify areas that cause cash losses and fix them immediately. Run through your P/L statement every three months and look at the top five expensive items to reduce without affecting quality. Get experts to work efficiently and minimize waste. Every penny matters for a small business. Having worked as small business consultants for decades now, we know how to plug those cash leaks.

To help you be a financially fit company and succeed: Write to us at contact@possiblegroup.com.