There’s a massive difference between profit and cash. Let’s explore the differences to make a better plan to increase both.
1. Sales.
Profit increases when you increase sales; cash increases when you collect the money from customers. To increase both your profit and cash from sales:
Delight your customers
Generate more leads and referrals
Convert a higher number of quotes or proposals
Increase transaction frequency
Increase transaction value
2. Invoicing.
Profit increases when you send an invoice to a customer; cash increases when you collect the invoiced amount. To increase both your profit and cash:
Set clear Terms of Trade
Offer a small discount for early payment
Agree the price in advance
Stick to your payment terms
Don’t do work for people who have overdue payments
3. Margins. Increasing your margins will increase your profit; collecting the increased margin will increase your cash. To increase both your profit and cash:
Increase your prices
Invoice faster
Negotiate better payment terms with suppliers
Reduce errors and rework
Train and empower your team
Increase your efficiency
4. Financing.
Reduce your finance costs to increase your profit; borrow money for assets to increase your cash. To increase your profit and cash through financing:
Spread the costs of assets over 3-5 years instead of buying them outright (e.g. vehicles)
Borrow from a bank instead of a finance company
Secure the asset purchases over ‘bricks and mortar’ (if possible)
5. Overheads.
Reducing your overheads will increase both your profit and cash. To reduce your overheads:
Negotiate with suppliers
Measure your return on your spend (e.g. advertising, accounting fees, etc.)
Review your subscriptions
Go paperless
This is not an exhaustive list of ways to increase your profit and cash. We can help you identify specific areas of improvement in your business to increase both profit and cash.
"Never take your eyes off the cashflow because it’s the lifeblood of the business." - Sir Richard Branson
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