Proactive Cash Flow Strategies for Stable, Profitable Companies

When it comes to improving cash flow, many articles suggest strategies that give the illusion of control. However, the final decision often lies with someone else – your client, vendor, or creditor. While these strategies may work for companies in financial trouble, stable and profitable companies can focus on proactive strategies they can control. By doing so, they can gain a competitive advantage and increase both cash flow and profits.

Many popular cash flow strategies, such as getting a loan, increasing pricing, selling more, or offering discounts for early payment, depend on the decisions of others. Your bank decides whether to lend, your client decides whether to pay more or buy more, and your client decides whether to take advantage of early payment discounts. 

Short-Term Gains, Long-Term Losses: Some cash flow strategies can actually decrease long-term cash flow and profits while providing short-term cash infusions. Factoring or selling receivables, taking out merchant cash advance (MCA) loans, offering discounts for on-time payments, and delaying payments while incurring late fees are examples of such strategies. While they may bring cash in faster, they can ultimately dig you into a deeper cash flow hole.

Profit vs. Cash Flow: It's important to recognize that increasing cash flow does not automatically increase profit. Too many popular cash flow strategies increase short-term cash by sacrificing long-term cash flow and profits. Or they have a built-in expense to execute. These common strategies can dig you into a deeper cash flow hole even if they get cash into the door faster: Using credit cards and maintaining a balance to float expenses, increasing sales through discounts, and offering discounts for payments in advance or deposits are all strategies that can negatively impact profit.

Stable and profitable companies have the advantage of focusing on proactive strategies that they can control. These strategies may not provide immediate cash infusions but can lead to sustainable growth and increased cash flow and profits in the long run. 

Your mindset is your most important asset in finding permanent solutions to any cash flow challenge.  It's essential to keep an open mind, to understand the pros and cons of different strategies, and be aware of who is really in control of the impact a strategy can have.

I'd love to hear your experiences with cash flow strategies that have worked for you in your business. 

Feel free to leave a comment or ask questions as you embark on your journey to financial success!

 Is there a cash management topic you'd like to learn about? Contact me at [email protected] or LinkedIn at linkedin.com/in/dsafeer/  to introduce yourself, share ideas, or ask me questions about managing your business's cash.