Reduce chances of loss and mismanagement in your business by implementing these five elements into your routine.
1. Invest in a point of sale (POS) system
POS systems are a necessity for any business to be successful. They’re not just transaction hubs anymore. They now include the computer system, cash drawer, card reader and so much more. They’re a combination of hardware and software that help business owners streamline day-to-day tasks, including keeping track of cash flow in ways you may not expect. Sure, they log every sale and refund granted. But they also keep track of inventory so managers know there is enough supply to meet demand, make it easy to manage rewards programs, sales, and many other elements essential to maintaining healthy cash management practices. Learn which POS system would best suite your type of business activity.
2. Keep your breakeven point at the forefront of your mind
A breakeven point is possibly the most important number a business owner needs to know. It’s the point you must succeed at in order to become profitable. If you don’t keep this number at the forefront of your mind at all times, your business will not be steadily profitable. Calculating this number will make your ongoing expenses clear to you. If the number is too high, adjust it by cutting expenses. Gauge your breakeven point often so that expenses never become too much for you to handle.
3. Collect money owed when goods and services are delivered
Small, local businesses often rely on friends and neighbors for business when they are just beginning. No matter who your customer is, insisting on timely payment is a key to maintaining healthy cash flow. You are providing a good or a service, not a loan. Sometimes payment plans are necessary, but limit the amount you allow. If customers lag on payment often, provide incentives for prompt payment.
4. Keep cash reserves on hand.
Cash reserves are a must. Businesses have hard months, growing pains are a necessary evil; surprise expenses pop up out of nowhere. Cash reserves will lessen the financial blow your business feels from unexpected costs like a leaky sink. If you maintain plentiful reserves, you can avoid going into debt because of these unplanned costs. Put some profits in reserves each month before using them to expand the business.
5. Make all policies clear to customers, including refunds, exchanges and incentives.
Clear policies will make your life easier, plain and simple. Establish clear refund and exchange policies early and stick to them. Customers should feel free to express dissatisfaction or exchange goods within a reasonable amount of time. But maintaining strict and straightforward policies is a way to make sure your bottom line doesn’t suffer every time a customer is slightly dissatisfied. Reduce the chance of falling victim fraud; don’t offer cash refunds.
Incentive policies are just as important as refunds, but in the interest of profit, don’t spend too much on them. Sponsor a giveaway on social media offering one or two popular products to the winner. This is a low-cost way to increase your social media traffic and promote your store. Send coupons to your customer list via e-mail so they don’t cost anything; offer loyal customers a rewards card as an encouragement to keep coming back.