Attaining growth for your business takes a lot of time and effort. The process, however, does not end when you’ve attained the much-needed growth and expansion. Instead, this phase merely opens the door to new challenges and fresh opportunities that you could take advantage of for further growth. But, of course, the biggest challenge at this point is sustainability.
Growth and expansion have both positive and negative effects on your business. Expanding your business means you are giving it the capability to cater to more customers and earn more revenues. However, this could also mean increased operating expenses.
Aside from higher overheads, growth that is not well-managed could also lead to negative cash flow. If not addressed, you might end up working on a strategy to manage financial turnaround instead of growth!
On the other hand, sustaining growth means that you’re keeping your business in good financial health despite the new challenges it faces. It continues to have positive cash flows. The company continues reporting profits instead of losses. Sustainable growth also means that the business does not have to raise additional capital through financing or equity.
How is this possible? Below are some of the ways that you can sustain the financial growth of your business.
Lock On To High-Quality Customers or Clients
If you’re in the service business, or if you offer invoicing instead of upfront cash payment, it’s important to identify high quality clients during the prospecting stage. They should, for example, have excellent credit scores and are not in any financial trouble. Ensuring that the prospective client has these attributes can guarantee timely payments and help avoid cash flow problems in the future.
The quality of your clients also affects your ability to seek out financing when you need it to address immediate cash needs. Invoice financing companies are known to decline certain invoices when they find out that your client is having problems settling its obligations or is having cash flow problems.
Establish Effective Collection Practices
Aside from inking deals with high quality clients, your collection team should also be able to collect on pending invoices effectively. Collection is an art form, especially because your clients are also trying to manage their own cash flows and would like to defer payment as much as possible. While understandable, your business must make sure that its clients are keeping to their obligations.
Here are a few invoice collection practices that you could introduce to your collections team and integrate as part of your processes:
- Document every step of the process. Documenting communication policies and scripts keep everyone on the same stage. Not only does this improve the efficiency of your collection practices, but it also makes sure that everyone is keeping to the ethics of debt collection.
- Create a detailed schedule for calling clients. Your collection team should call clients at specific dates, and not just on the due date and when the invoice is already overdue. Include a schedule for calling the client to remind them about the invoice around 3-5 days before the payment is due.
- Get your invoices in order before sending them. Your clients, like your customers, are particular about documentation. Make sure your invoices have all the right information before you send them to your clients. If there’s a discrepancy between the current and previous invoices, your customers are likely to delay their payments unless these are rectified.
- Provide your clients with multiple avenues of payment. There are numerous options for payment available these days that you can set up. These can help speed up payment as one mode may be convenient for one customer but could be a hassle for another.
Improve on your collection practices, and you’ll see your cash flow becoming more stable. It also becomes more able to sustain the expanded operations of your business.
Train Yourself and Your Staff to Be Proactive
Proactive management in a business gives entrepreneurs the skills to identify what could possibly hamper the progress of the business during an expansion, and what they could do about it. Advanced planning made possible by being proactive lessens the risks encountered during growth.
Adopting a proactive mindset results in several advantages, including the following:
When you’re constantly aware of your situation and what could happen at any minute, you become flexible. You know what to do even before an emergency erupts, and you could adjust your actions in response to your surroundings and circumstances if a catastrophe does occur. Flexibility can remove a lot of stress that you will otherwise experience if you’ve trained yourself to react to situations as they come.
- Prompt reaction times
Being reactive means you sit back and think about how to react in the middle of a crisis. Being proactive, on the other hand, means that you already thought about the possibility of a crisis and how you can avert such an event. Thus, you can take the necessary steps almost immediately to steer your business in the right direction to ensure its survival.
Get together with your team and discuss possible scenarios that your company could encounter as it expands. Create protocols that the rest of the workforce must abide by in response to these situations. Identify sources of financing like a business line of credit that you can apply for when the need does arise.
Monitor and Manage Your Expenditures
Some expenses are necessary to maintain the business, but others are not as essential. Unfortunately, both types of expenses can divert money from the cash flow. As mentioned earlier, your business is definitely going to see increases in certain expenses when you decide to expand. At that point, you’ll need to start managing your expenses and introduce reductions or eliminations where necessary.
Take a look at the following tips for reducing expenses for your company and keeping cash flow even during the stages of expansion:
- Integrate an expense tracking schedule into your routine
Taking the time to look at your expenses helps you determine whether your business is spending too much on non-essential stuff. It should be a habit that every entrepreneur should cultivate even during the early days of the business.
- Find out how your competitors are spending on operating expenses
Finding out about your competitor’s operating expenditures will reveal information that you can use to contrast with your own expense figures. If your competitors are spending less than you are, you’re likely spending money on something that is not essential to your business. You might also be spending too much money on essentials that you can actually renegotiate, like lease terms or debt repayments.
- Let go of assets eating up money for maintenance
Fixed assets like equipment that are no longer assisting in earning revenues for the businesses are dead investments. You should find ways to at least repurpose these assets or to let them go to reduce your expenses in maintenance and repair. You could also seek out financing to replace repair-intensive fixed assets with brand-new models.
- Automate simple tasks
Automation can introduce savings by reducing expenses that go towards labor. Invoicing, for example, can now be done by a team of one or two people that use accounting software like Xero and Quickbooks. The Internet and associated technology also eliminate courier expenses as well.
Expense reduction is necessary for improving cash flow. However, this is only possible when you take time to monitor, identify, and then cut back on the expenses that are tying up a lot of your business’ revenues.
Find Ways to Streamline Your Business Procedures
Keeping the business steady during its expansion means earning enough revenues to keep the cash flow stable. Marketing should be an integral part of your sustainable growth strategy because it brings your products or services to your target market’s attention. Aside from boosting marketing, you should also focus on introducing measures that will streamline your business processes.
Take inventory management for example. E-commerce is a very demanding endeavor. Your business literally does not sleep. You can get orders from customers at any time of the day, even beyond what is considered normal office hours. Your website does the job of taking the orders 24 hours a day and 7 days a week, but fulfillment is your job as an e-commerce merchant.
You’ll need to introduce ways to automate or at least streamline your inventory management so you can keep up with the demand. Your business must always be on top of its stocks so it can replenish supplies even before they run out, or else it will lose potential revenues.
The same need applies to other processes in the business, like accounting, invoicing, and customer service. As mentioned earlier, automating these processes can help your business reduce its expenses. In this context, it also helps raise the quality of customer service and enhances your fulfillment capabilities. This, in turn, can potentially raise your revenues and sustain your cash flow.
Growth for a business is always desirable. However, because growth can alter many factors that govern your business, it’s important to learn how you can sustain that growth and maintain positive cash flow.
You should start thinking about how you can automate specific processes in your business and improve its response time. You should also find ways to reduce expenses while also generating sufficient revenues to keep your cash flow positive. Last but not least, you should also start cultivating a proactive mindset within not just yourself but your entire business organization.