Friday, June 18, 2010

Finding Cash Flow in Offices and Inventory

Small businesses (and larger businesses, too) are often looking for ways to save money. Sometimes the cash crunch can cause many entrepreneurs and business owners to stop thinking creatively about solutions to their cash flow problems. Issues weighing on the mind seem to cause one's brain to freeze up and spend 90% of the time focusing on the issue and 10% on the solution. This, of course, can lead to frustration and desperation. So I'm here to help you think clearly about what to do to help your business find more cash flow for its day to day operations. (And thus mitigate your stress levels!)

If you own a business that has more than one location, determine how much income each location generates. If one or two locations generate 70-80% of your business, strongly consider closing the other locations. You will save the overhead costs for that location (rent, utilities, etc.). If you really believe you need that location despite not obtaining much business from it, consider establishing a mobile venue or partnering with another business that has a location near the one that you may close. You may be able to make use of their office on an occasional basis or rent a small area in their warehouse – whatever your company needs. Saving on overhead helps you convert more of your costs from fixed to variable. Variable costs are much easier to manage than fixed costs, especially when cash is tight.

If you keep inventory, make sure what is primarily stocked in your inventory is what is actually selling. Inventory takes up space that you can make better use of if there is no turnover of that inventory. Most products have a shelf life. Therefore, if portions of your inventory are not moving and the lack of movement is not due to poor marketing or selling on your part but due to a drastic drop in demand for those items, sell them at a deep discount to clear it out.

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