5 ways to increase profit and improve cashflow
The dual goals of increasing profit and improving cash flow are usually at the forefront of every entrepreneur's mind, as both are essential for sustaining and growing your business.
However, the path to profitability and strong cashflow is not always straight forward.
Here, we explore 5 ways to increase profit and improve cashflow, offering actionable strategies that can improve the financial health of your business.
These insights are particularly beneficial for businesses navigating the complexities of the current economic landscape.
1. Sales
Profit increases when you increase sales; cash increases when you collect the money from customers. To increase both your profit and cash from sales:
- Delight your customers
- Generate more leads and referrals
- Convert a higher number of quotes or proposals
- Increase transaction frequency
- Increase transaction value
2. Invoicing
Profit increases when you send an invoice to a customer; cash increases when you collect the invoiced amount. To increase both your profit and cash:
- Set clear Terms of Trade
- Offer a small discount for early payment
- Agree the price in advance
- Stick to your payment terms
- Don’t do work for people who have overdue payments
3. Margins
Increasing your margins will increase your profit; collecting the increased margin will increase your cash. To increase both your profit and cash:
- Increase your prices
- Invoice faster
- Negotiate better payment terms with suppliers
- Reduce errors and rework
- Train and empower your team
- Increase your efficiency
4. Financing
Reduce your finance costs to increase your profit; borrow money for assets to increase your cash. To increase your profit and cash through financing:
- Spread the costs of assets over 3-5 years instead of buying them outright (e.g. vehicles)
- Borrow from a bank instead of a finance company
- Secure the asset purchases over ‘bricks and mortar’ (if possible)
5. Overheads
Reducing your overheads will increase both your profit and cash. To reduce your overheads:
- Negotiate with suppliers
- Measure your return on your spend (e.g. advertising, accounting fees, etc.)
- Review your subscriptions
- Go paperless
This is not an exhaustive list of ways to increase your profit and cash. We can help you identify specific areas of improvement in your business to increase both profit and cash. Contact us to find out how.
"Never take your eyes off the cashflow because it’s the lifeblood of the business."
Sir Richard Branson
Seek support
Implementing these strategies requires a meticulous approach and an understanding of your unique business context.
At First Class Accounts Ovens & Murray and Busy01 Consulting, we provide bookkeeping and business consulting services that are tailored to your specific needs. We can identify areas of potential financial improvement and help you implement strategic solutions to enhance both profit and cash flow.
Don’t let the complexities of financial management hold your business back. Contact us today to learn how we can assist you implement these 5 ways to increase profit and improve cashflow.