Cash flow is one of the most critical ingredients for the success of any business: It’s how companies pay their bills and employees. However, this vital resource can leak in ways that may be easy to glance over at first but will become problematic over time. Be on the lookout for the following types of cash flow leaks.
Unused subscriptions can create a slow but steady cash flow leak. Periodically review your subscriptions from time to time and cancel those that your business no longer uses. Additionally, in the case of subscriptions that remain useful, take a look at any features different plans might have: It’s possible your business may be able to save money by downgrading to a plan with just the options it needs.
When productivity lags, cash flow suffers. It’s important to note here that not all productivity issues can be chalked up to personnel problems: Even well-motivated employees may struggle to be productive if they have defective equipment, an unfavorable schedule, or a lack of training, for instance. Often, the best way to identify these problems is to ask your employees for feedback on what would help them be more productive. (Just make sure you follow through on any promises you make. Broken promises are discouraging and may drop productivity even more.)
Clients who fail to pay their invoices on time are a problem for cash flow. One reason is obvious: If they don’t pay you, you’ll have to cover your expenses with other resources until they do. The other reason is less obvious but still important: Hounding clients for payment sucks up time—and therefore money—you or your employees could spend elsewhere. To fight the problem of late payments, businessman and writer Thomas Smale recommends incentivizing early payments and punishing clients for late payments.
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