How to Improve Operating Cash Flow

Now that the world is undergoing unprecedented times, many businesses are struggling with their operations. This affects the overall cash flow of the company, especially as there is a growing difficulty of properly paying employees on time, paying suppliers, and collecting receivables from customers.

In a time where the world is dealing with such events, the best course of action would be improving the overall operating cash flow of your company. After all, cash definitely reigns supreme when it comes to managing and growing a company.

If your company is struggling to stay afloat or may have had to make salary cuts, below are some ways you can help boost the cash flow in your firm. To find out more, read on.

How to Improve Operating Cash Flow

What is Operating Cash Flow?

Operating cash flow (OCF) is a type of financial measurement that gauges the cash or the amount generated by a company during regular business operations. This measures the ability of a firm to bring in enough funding to help maintain its day-to-day operations.

Without a positive operating cash flow to fund its operations, companies may either require external help and financing or simply may not be able to sustain their operations.

Ways to Improve Operating Cash Flow

There’s really only one way to go about this. No matter how challenging and difficult it may seem, the best way to do boost the company’s operating cash flow is to simply collect client and customer payments. These are also known as receivables and they should be collected at the soonest possible time.

Doing so allows you and your firm are not only to maintain professional relationships with your suppliers and clients but also show that your company is dedicated to caring for its employees and their overall well-being.

Below are ways you can help enact more strategic changes in your place of business.

Offer Deals for Early Payments

For clients and businesses alike, there’s nothing like getting good deals, discounts, and even incentives. After all, this saves them a bit of money and stress. To encourage clients to pay early and even on time, why not look into payment incentives or certain discounts?

By doing this, you’ll be gently coaxing your clients to pay their bills ahead of schedule, thereby preventing you from suffering a headache later on. This is a good start as this gives you early access to your cash flow.

However, while this may be a good jumping point, make sure that discounts and incentives are something that won’t damage your resources, especially not during this time.

Bundle Your Deals

At times, there are goods and services which typically don’t sell as fast or as effectively as your other products. To help drive in sales and cash flow, you might want to explore bundling your inventory. This way, you can increase sales as well as bring more funding to your business. For example, you can offer a package deal that includes a popular item and a less popular item so it increases the sales of the typically less popular item.

Increase Pricing on Products and Services

The thing about increasing prices on products and services, especially in a highly competitive industry, is that it can possibly drive away existing customers and may even deter new ones. However, it’s great to change the prices levied on certain services and products, particularly if these activities and services demand more effort and research and are generally much more complex in nature.

While this may seem like a bump on the road, this will help you gauge the willingness of customers to stay with you as well. With the help of your employees, you can help prioritize these targets, allowing you to meet your financial goals from all sides of the board.

Request a Deposit

There may be clients who tend to have bulk orders at any given time. With the added pressure and workload on your employees, you might want to start requesting  a deposit. Just think of this approach as a form of payment discipline of sorts.

This gives you and your workers the assurance that you’ll get paid on time. Plus, the advanced deposit actually increases your operating cash flow for the month.

How to Improve Operating Cash Flow

The Bottom Line

The road towards improving your operating cash flow may not be easy. However, with these tips, you are guaranteed to achieve your financial management goals one step at a time. This, in turn, will allow you to run business operations as smoothly and efficiently as possible.