A cash flow mainly counts the net balance of money, which is coming and going out from a business at a specific moment. It can be both positive and negative.
Being a business owner without knowing how to maintain a healthy cash flow in your print business causes financial loss. It applies to both the traditional and the e-commerce print industries.
A traditional printing business or eCommerce business both face many challenges in the case of digitalization tendencies, banking, advertising, and shipping services, and these challenges are related to business profit and cash flow.
In this article, we will discuss the aspect of maintaining a healthy cash flow in eCommerce print business.
What Is The Point of Maintaining A Healthy Cash Flow?
Maintaining a healthy cash flow is important for keeping strong financial connections between consumers and suppliers, and this management system requires observation. As a result, you need to pay some attention to observing and analyzing the cash flow to manage it effectively.
Look after the management system to understand the core aspect of cash flow. Usually, companies should track and analyze three types of activities to balance their liquidity and solvency, such as –
- Cash flow from operating activities – It represents how much money a company makes from its ongoing, regular business operations
- Cash flow from investment activities – This indicates how much money was generated or spent on investments
- Cash flow from financing activities – This measurement tracks the flow of money between a company’s owners, shareholders, and borrowers.
Apart from these three types of activities, a company also must look forward to the four pillars of cash flow management to avoid a mess.
Here are the four pillars:
- Cash Cushion – It is a specific amount of money that a business owner reserves to protect himself from late payments and insufficient-fund fines.
- Get Debt Free – This indicates that you have a sustainable level of debt and you can do a larger amount of transactions in your business without any trouble.
- Liquidity – Cash flow liquidity is a phrase that refers to a company’s ability to pay back debts after the cash funds are generated.
- Payoff – The payoff is the amount that has to pay in order to fully satisfy the requirements of your mortgage loan by completing the debt.
We know that balancing payment methods and data is not an easy task. In this case, proper usage of modern technology can help a busy business owner. A survey shows that Up to 64% of employees trust a robot over a person.
Here you are of course not going to hire a robot, so alternatively being a tech-savvy businessman is the only option.
For example – using Ms. Word, Excel, and PowerPoint can help you to keep track of your employee document. Similarly knowing about new machinery and technologies in the printing business also assist a business to become up to date. Such as the usage of an inkjet printer or a 3D printer.
Processes Of Maintaining Healthy Cash Flow
Cash flow management is the process that keeps track of a company’s cash transactions. It observes all outgoing bills, payroll, and property expenditures of a company.
A healthy cash flow does not always indicate earning more money than you spend. It is also about ensuring that your organization can adjust to different opportunities quickly without spending a lot of money.
Cashflow provides a clear picture of cost vs. revenue by assuring the company management. For example, data shows that the print industry’s net profit margin has risen to 5.2 percent from 1.4 percent in the last few years.
Apart from that, there are a few common steps to maintaining a well-fitted cash flow that any organized company may follow:
Here are 8 primary steps to maintain a healthy cash flow in print business:
- Do Negotiate With Vendors
- Look forward to an incentive
- Do something for your customer
- Be specific about your payment schedule
- Jot Down The Important Finance issue
- Take customer-friendly steps to collect due payment
- Be professional with the payment process
- Are unnecessary expenses needed?
#1 Do Negotiate With Vendors
Being a business owner, it is a duty to think about the business first. Instead of paying your suppliers immediately, talk with them to see if they will offer a discount in exchange for early payment.
If suppliers are ready to give you a discount in exchange for early payments, then proceed with the payment. Mastering the art of negotiation is an important component of doing business, and it can help you encourage your suppliers to give you a better price.
#2 Look Forward To An Incentive
Try to be a regular customer of a vendor to get incentives or discounts. While seeking a discount, make sure to provide both the discount percentage and the total price. Professionals frequently request discounts in odd percentages, such as 3.5 or 7%. This creates a positive impression to the vendor that you go throw their proposal and offers.
#3 Treat your Customers in a good way
Valuable customers also deserve some perks. Give them a small discount to keep them coming back to you. Such as 20% of present consumers put impact 80% of your future revenue. Do focus on your customers and make the best deal to lure them.
Ask them about their dealing experience with your company or are they facing any problems or not. Listen to their problem and be transparent with them.
#4 Be Specific About Your Payment Schedule
Review the payment terms and billing cycle regularly. Include a receipt to your clients before sending the next deliveries. In this case of increasing payment time, wait a minimal period. However, do not forget to remind the customer of the payment policy if the payment is due.
If any company is working with an existing customer, request a deposit before the work begins. We have learned about it in the rules of the cash flow management pillar.
#5 Jot Down The Important Finance issues
Make a list of the due payment. To minimize the issue use the MIS system. In Finance, cash flow management is a key use of MIS. Businesses can easily track cash flow through accounts receivable and account payable by using MIS in finance.
If you are not interested in the MIS system, then you may assign agents to monitor the whole thing.
#6 Take Customer-Friendly Steps To Collect Due Payment
Letters are a kind approach to remind consumers of payments that they may have forgotten about. Send them a polite letter, be careful about the language, and do not write something offensive or harsh while asking.
#7 Be Professional With The Payment Process
Make sure all clients fill out the formalities of a credit application. To avoid misunderstandings, try to use a written agreement with the clients.
Request the client to read out all terms and conditions on your credit application. In many cases, clients may sign a separate statement to resolve the concern of due payment or other financial issues.
#8 Avoid Unnecessary Expenses
With the technological advancements, a printing business requires to be updated. New technology means new equipment, and new equipment requires maintenance. So replace the backdated equipment with the updated ones by spending a little extra money.
Ways Of Protecting Your Print Business From Negative Cash Flow
When outgoing cash exceeds its incoming money, a company will meet with negative cash flow. It has a direct impact on a print business. But it doesn’t mean no one can overcome it.
To encounter a negative cash flow issue, a few things need to keep in mind:
- Do not blend the issue – profit vs. cash flow
- Lack of business planning
- A weak Effective Management System
- The concept of high pricing
Do Not Blend The Issue – Profit Vs Cash Flow
Do not get mixed up with profit and cash flow concepts because there is a distinction between them. Profit mainly focuses on the leftover money after utilizing all of it. Moreover, cash flow concerns both incoming and outgoing money.
You may ask what is the importance of profit vs. cash flow. In this case, cash flow is important because it has a role in gathering profit. For example – people will see the growth of your business, not the profit. Whenever they will notice your company’s growth, they will already start to know that the company is gaining profit.
Lack of Business Planning
Make a perfect business plan to keep the business away from negative cash flow. Because a printing business is always more competitive than others. According to the Fundera, 20% of businesses collapse in their first year, 30% fail in their second year, and 50% fail after five years. Finally, 70% of small company owners fail in their 10 years of business.
If you have low capital and a struggling business, there’s a good chance your company won’t be able to sustain a healthy cash flow, and obstacles in financing are the reason. Similarly, lack of management is another reason, because poor management has an impact on the budget, worker turnover, and total earnings of a company. Added to this, poor business planning, and mistakes in marketing are also two major causes of failure in a business because if a business plan is not stable, it can be a reason for wasting too much money without planning.
A Weak Management System
Ineffective productivity and marketing methods cost a lot of money without failing to generate a consistent income. For example, the management and marketing teams sometimes fail to carry out plans to meet target customers, which reflects a bad management system.
To avoid such major obstacles, simply make a list of everything you will need and maintain your Customer Relation Management (CRM) up to date.
For instance – you are running a custom product printing business on a platform like Shopify. Successful integration of a product customization application comes along with a proper product customization pricing solution. Your customers will be able to see the price with each change they make on the product they want to purchase. Also, enabling a customization solution lures more customers as well.
The Concept Of High-low Pricing
It is vital to achieving the desired profit margin; otherwise, your company will fail in the long run. Demanding a high price for your product may provide a one-time profit, but strategically setting a reasonable price can capture customer attention for a long time.
In this case, a “high-low price plan” can be beneficial for you. High-low pricing is a frequent retail pricing technique. In this approach, the product is originally presented at a high price, and whenever the market falls, marketers offer discounts.
According to one survey, 75% of customers expect discounts or special deals. Because they think they are buying valuable goods at a reasonable price.
To conclude, do not just mess with the concept of maintaining a healthy cash flow for your print business. Simply concentrate on investment, payment procedures, and customer management, as well as how to deal with negative cash flow.
A further way to keep that situation under control is to track your cash flow results every month to see if your management is maintaining the right type of cash flow or not.