Ten Ways to Convert Costs into Cash Flow
Positive cash flow can be elusive, especially when you depend on revenue to keep you in the black. Coveted Financial Services advises its Chicago-area clients to focus on the cost side of the ledger as well. Here are ten proven strategies for sending more of your budget straight to the bottom line.
Promote productivity. In business, time actually is money. That’s why books on productivity are perennial bestsellers. Start with 7 Habits of Highly Successful People by Stephen Covey. Teach your team how to avoid wasting time and create incentives for exceeding output standards.
Use technology. Avoid travel costs by holding virtual meetings. Use cloud storage to save the time and shelf space consumed by storing and handling paper records. Evaluate open source software, which can replace expensive business applications for some office workers.
Narrow your focus. By chasing many targets, you waste resources. Concentrate on prospects who best fit your niche and watch your quality, customer satisfaction and market prices rise. As Facebook founder Mark Zuckerberg said “The trick isn’t adding stuff, it’s taking away.”
Update your marketing. Review your marketing methods for ROI. Expensive trade shows and advertising are becoming less effective, while social media and new tools such as re-marketing can enable your business to engage prospects at lower cost and with higher impact.
Get Lean. Once you learn to see them, you will find waste and cost everywhere. Techniques for value stream mapping, although developed for manufacturing, are applicable to all companies. To learn more, start with books such as The Complete Lean Enterprise, by Keyte and Locher.
Cut supply costs. Develop multiple sources for each of your primary materials and require potential suppliers to compete to earn or keep the business. For everything from office supplies to raw materials, suppliers should compete on pricing, delivery, inventory and payment terms.
Cut financial costs. Review your loans, bank accounts, leases, and insurance policies. Consolidate where possible. Shop as you would with any other suppliers. Gather quotes. Then ask your providers to match the best rates or consider moving your business.
Refine staff duties. Every job description has a mix of high-value activity and more tedious work. Consider hiring temps to enter leads or post transactions, keeping your best salespeople selling and your best financial people focused on budget and forecast.
Check your footprint. Could you lease underutilized warehouse or office space to another company? Would your suppliers agree to consign raw material? Could your production waste be made into another product? Are your HVAC and lighting systems the most efficient designs?
Improve safety and quality. Caterpillar Inc. lists profitability as its #3 business priority, after safety and quality. A single work accident could devastate your business, and the costs of poor quality are a steady drain on customer satisfaction, production yield, reputation and pricing.