How do you get up in the morning? Your heart pumps blood through your veins—powering your movements, thoughts and activities. In the same way blood circulates through your system to get you moving, a sufficient cash flow is key to jumpstarting your company.
As you run and grow your business, keep your cash flow—the lifeblood of your system— pumping through your operations.
To manage your cash flow, you need a business plan that’s strategic and actionable. When developing your plan, consider these four steps.
Step 1: Analyze Your Current State
There’s no way to determine what improvements your financial state needs without having a thorough view of where you are now. Assess your current finances based on the following points:
- What revenue sources are bringing money into your company?
- What expenses do you have that take funds away from your company?
- Does your company owe money to lenders?
- What areas of your company need more resources allocated to operations?
Use these questions as the foundation for your self-analysis. By itemizing every expense, revenue source, debt and necessity you have, you’ll better understand how to increase cash flow.
Step 2: Set Goals for the Future
Now that you’ve completed your self-analysis, you’re ready to outline the ideal state of your company and the goals you should achieve to make that a reality. First, ask yourself: Am I trying to run my business for growth or profitability? It’s often difficult to focus on both objectives, so you need to decide your goal before moving forward.
If you’re trying to maximize revenue, you should turn your focus to investing in resources, like high-performing employees or equipment to streamline your operations. While this is an important measure to take, don’t expect to see an immediate return on this investment. You’ll reap the benefits further down the line.
If growth is your objective, take a more strategic approach to managing your resources. Only make purchases when necessary and keep an eye on your expenses. When you take this approach, you’re more likely to have more cash flow coming in rather than going out, and minimizing these expenses increases your profitability.
Step 3: Make Your Plan Actionable
After determining your goals, develop an actionable strategic plan to increase your cash flow. Outline concrete steps to improve your financial standing. Start by creating annual action plans. What are you going to do over the next year to increase cash flow? Maybe one of your goals is to double the amount of revenue your sales team brings in.
Focus on quarterly objectives. When you’ve identified large actions you want to take over the next year, break them down into quarterly objectives. Take sales as an example. What is an action you could take this quarter to improve sales? One objective might be to bring in more leads. Identify how you’re generating leads and focus your efforts into those channels.
Identify monthly steps. Focus on monthly steps that bring you closer to achieving your ultimate goals. If you’re striving to boost sales, perhaps this month you could evaluate your sales process, identify inefficiencies and close the gaps.
Use your knowledge of finances and cash flow to plan out when you should be able to hit your objectives, what efforts you should make, and how to remove roadblocks that stand in your way.
Step 4: Implement and Evaluate
You’ve done the planning, so it’s time for implementation. Following through with your actionable business plan to increase cash flow is essential to improving your company. To support your action plan, you need to manage your finances.
And, it doesn’t end with implementation. You should evaluate your efforts to determine if your plan is working. Keep your team accountable for their efforts by mandating monthly, quarterly and annual reports. If these efforts aren’t working, revise your plan and the allocation of your resources.
You won’t see a major increase in cash flow overnight. Sometimes it might be hard to start the business planning process on your own. That’s why turning to a financial partner and guide is ideal.
With a financial partner that is experienced in helping companies grow revenue, you’ll be able to integrate your new business strategy seamlessly throughout your company. A financial partner provides expert insight about your financial needs, making recommendations for improvement. When you work with a financial partner, you’ll have a better understanding of what it takes to drive growth.
Want more information on finding the right financial partner to help increase cash flow?
Contact us for a free consultation today.