The first quarter of 2015 is almost over. Is your year going well so far? If you want success in 2015, you’ll need to pay attention to the financial aspects of your business. Here are four ways you can improve your chances of having a financially great 2015.
1. Focus on Cash Flow
Businesses need cash flow to run, there’s no hiding from that. And as a small-business, you’ve probably already tightened your purse strings and ramped up your sales. But here are a few more things you can do to keep the cash flowing:
- Get paid upfront. If your business provides products or services, create a new billing system that offers clients a discount if they pay in advance. For instance, if you run a pest control business, ask your quarterly clients to pay a year in advance to receive a discount. It will be an incentive to them and put immediate (and risk-free) cash in your till.
- Change your billing and payment cycles. Reach out to all your suppliers and negotiate additional discounts for shorter payment cycles. Saving an additional 5 to 10 percent from your purchases can make a big difference in your cash flow. Alternatively, you can ask suppliers to extend their payment terms, while shortening the payment cycle of your customers. This allows you to use the incoming customers’ money to pay your suppliers.
- Move your inventory quickly. You can do this with frequent sales, as well as by reducing the amount of stock you keep for items that sell infrequently. Whatever you can’t sell, place online at sites like eBay, Amazon or even Carousell. Or better yet, if possible, return it to the supplier.
2. Make Sure Slow Paying Customers Pay Up
No matter how many sales you make, you need to collect on those sales in order to have the necessary cash flow to run your business. One of the first things you should do is to go through your past due accounts receivable files and make a serious effort to collect what’s due. You’ve probably already tried the usual tactics — sending out reminder notices, calling and emailing the customers repeatedly, and offering them a discount to pay now. If you’ve tried all of this and it still hasn’t worked, it’s time to get serious. Here are a few more options:
- Visit them personally. It’s easy to ignore phone calls, emails, and letters, but when a creditor comes calling, it gets people’s attention. Remind them in a friendly way they owe you money and you expect to get paid.
- Ask for a payment schedule. Sometimes people want to pay but simply don’t have the means. Call your clients and ask them if they can pay their balance in smaller installments. If they agree, put it in writing – and make it clear that if they don’t follow through, you’ll be forced to turn them over to a collection agency.
- Have your attorney write a letter. People tend to take letters from lawyers seriously. Have your attorney send a letter to all of your non-paying clients and demand what’s due.
- Sell them. If you simply can’t collect the debt, sell the invoices to a factor. You’ll only get a portion of their value, but if you don’t expect the customer to pay, a small portion of the invoice value is better than not getting paid anything at all.
In addition to cleaning up all of your old accounts receivables, you should create a new credit policy that drastically reduces past due invoices in the future. For example, you should run a credit check on new customers and do the same once a year on existing ones. If you notice a customer is paying late consistently, insist on cash-on-delivery payments until they have financially recovered.
3. Set Your Sales Goal
Zig Ziglar famously said, “A goal properly set is halfway reached.”
Your sales goal isn’t just a number you pull out of thin air. It should be based on real numbers and trends – and one that you can achieve realistically. To reach your goal, you can forecast your revenue and work toward that figure all year. Or, you can work toward your goal backwards. Here’s how to do it:
- Use last year’s sales, with adjustments or projections, to predict your sales target.
- Work out what the main thing that needs to happen for you to reach your sales target. For instance, based on your average salesperson’s yearly numbers, you may find that you need to hire new salespeople to reach your goal.
- Now figure out what needs to happen before that. You might determine that you need to transition your salespeople to work-from-home arrangements because you don’t have enough room to add more people.
- Continue to work backwards until you identify the first milestone that you have to take in order to reach your goal.
- Finally, set a time frame for each milestone.
4. Rewrite your Marketing Plan
If you’re still relying on phone book and newspaper ads for marketing, it’s probably time to throw out your marketing plan and start over. Even if you run a brick-and-mortar business, uch of today’s successful marketing is centered around the internet. Successful business owners reach out to their customers in a variety of ways. Before you rewrite your plan, make sure that you can answer the following questions:
- What do you offer your customers? In other words, what need do you fill in your customers’ lives? Hint: it’s the reason they buy from you.
- Who are your ideal customers? Most businesses have a core group of repeat customers. Who makes up your core? What are their characteristics and traits?
- Who are your competitors? You need to understand your competitors — what do they do better or worse than you. What is their pricing strategy? Where do they advertise?
Once you have a clear understanding of these things, it’s time to decide where you will try to reach potential customers. Your new marketing plan may involve all or some of these avenues:
- Digital marketing. This includes your own website, social media activity, running a blog, content marketing, pay-per-click advertising, links and backlinks to and from complementary businesses, and online press releases.
- Local marketing. To appeal to your local community, you can sponsor local events, form partnerships with non-competing local businesses, use a street team, signage, and other traditional forms of advertising such as billboards, flyers, and coupons in the local paper.
- Mobile marketing. More and more people are relying on their mobile phones for almost everything. The average Singaporean spends over 2 hours using the internet on their phone every day. Savvy business owners are finding ways to reach them there. You can optimize your homepage for mobile devices, create an app and then reward customers for using it with discounts and freebies, and use permission-based marketing with text messages.
With a sound strategy in place, you’re sure to have a financially happy 2015.