When it comes to improving cash flow, it’s common for business owners to first look for ways to cut costs and adjust payment terms. But there’s one area that you may not want to overlook: business operations. Efficient operations can have a big impact on your amount of cash on hand. Still not convinced? Here are the ways that smooth, effective operations can maximize business cash flow.
Streamlined processes mean cost savings
One of the most important aspects of your business operations is your process — all of the steps it takes for you to create, sell and deliver your product or service. It’s a good idea to regularly review how each step of your process is being completed, including handoffs between team members or departments. This could require interviewing employees and analyzing metrics. Look for redundancies and tasks that are currently performed manually that could be completed more efficiently with technology.
For many businesses, inefficiencies are caused by delays in technology or legal processes. Your IT department can have a big impact on whether critical operations are running smoothly or employees are getting held up and left unable to do their jobs — especially with a remote workforce.
Similarly, your legal compliance procedure can create a lag in cash flow by holding up deals or even disqualifying you from working with certain vendors. Streamlining these two segments of your operations can help ensure your business is as efficient as possible.
Research on equipment and technology pays off
The equipment and technology you use for your business can directly affect how quickly your sales efforts turn into cash on hand. To optimize your business’s operations and maximize cash flow, you need to maintain the right level of equipment and technology. That means if your business is growing, you’ll want to watch for the moment when purchasing more equipment or upgrading technology makes the most sense to meet your business goals.
On the other hand, if you’re not operating at the level you expected, downgrading technology or offloading some equipment can be good ways to free up capital that isn’t working for you.
There’s a delicate balance between having the equipment you need for peak performance and avoiding unnecessary costs for equipment you don’t use. Regardless of where you are on the spectrum, it’s worth keeping an eye on the latest technology and equipment trends in your industry. Doing so could ultimately lead to big savings in costs or big leaps in performance that might boost your revenue.
Effective hiring and training can drive growth
Ironing out inefficiencies with your staff is one way to improve your cash flow. You could have the most streamlined processes in place, but if your staff doesn’t have the right skills or isn’t properly trained, that could all be for naught.
For example, if your staff isn’t using software to its fullest potential, your business could be missing out on opportunities for efficiencies or increased revenue. You wouldn’t want qualified leads to sit in an unchecked database, never to make it into your marketing funnel, would you? In the same vein, you’ll want to reassess whether your hiring practices are working for your business. Having people working in roles that best fit their talents helps maximize growth — and improves business cash flow.
Internal communication helps maximize resources
At face value, internal communication doesn’t seem to have a direct connection to cash flow. But there are tangible benefits to having all your departments and lines of business on the same page.
For example, if your marketing team is sponsoring an event, let your sales team know so they can cross-promote it. Similarly, when everyone at a company is aware of business goals and opportunities, they can step forward and offer ideas for improvements. Having an internal communication plan also increases employee retention by making employees feel heard. This cohesion among your workforce helps boost productivity and drives your business toward its goals — both things that improve cash flow.
Simplified payment procedures quicken cash delivery
While it’s easy to look to your financing terms to speed up your process for receiving cash, don’t discount the operational aspect of accounts payable and the positive effect it can have on cash flow. Ask yourself: Is your sales team fielding the same payment questions? A clear invoicing and purchase order process can be worth its weight in gold if it means closing sales more quickly.
Review your process for vendor approvals and customer purchases. Is your payment process taking longer than it should? Time spent waiting translates to higher costs. And the sooner you’re paid, the sooner the cash can be reinvested in your business. Streamline your approach to ensure that everyone has all the documents they need before they even ask for them.
Your bank can improve business operations
Speak with a Chase business banker to discuss which products can help make your business operations run more efficiently.
For informational/educational purposes only: The opinions expressed in this article may differ from those of other employees and departments of JPMorgan Chase & Co. Opinions and strategies described may not be appropriate for everyone and are not intended as specific advice/recommendation for any individual. Information has been obtained from sources believed to be reliable, but JPMorgan Chase & Co. or its affiliates and/or subsidiaries do not warrant its completeness or accuracy. You should carefully consider your needs and objectives before making any decisions and consult the appropriate professional(s). Outlooks and past performance are not guarantees of future results.
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