Four ways to accelerate cash flow

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"Traditional methods to increase cash flow are not working," said Lisa Anderson, founder and president of LMA Consulting Group Inc. "When customers demand increased service and value, innovative strategies are required to succeed."

There are countless ways entrepreneurs can increase cash flow through supply chain improvements, but it's important to prioritize in a way that will drive results. "Resources are lean, so it’s vital to focus on what provides the best return on investment," said Anderson.

Here are a few strategies she says drive the bulk of results:

1. Inventory management

Anderson said the key is not only to reduce inventory but to do it while improving customer service. Otherwise, you lose valued customers. Each company requires a different approach, but, said Anderson, "After reducing inventory levels 40 percent or more in multiple companies in various industries, I've found that big picture areas were identical: people, processes, and systems."

2. Supply chain collaboration

Anderson shares some collaboration case studies: “We implemented vendor-managed inventory with a key customer, improving not only our cash flow but also the customer's. In another example, we partnered with suppliers and customers to develop innovative product and packaging that reduced cost -- increasing cash flow -- and improved performance. Lastly, we partnered with key customers and carriers to develop a transportation model that reduced freight costs -- increasing cash flow -- while improving service."

3. Know when to fire a client

Not all customers are good customers. "Negative profitability customers should be reviewed in detail. Is there a compelling strategy to keep them? Focus efforts on profitable customers," said Anderson. Similarly, if a few customers are tying up significant amounts of cash, try to improve the relationships.

4. Cost cutting isn’t everything

Even Anderson admits that cost reduction can’t be the sole focus in improving cash flow. “If you spent the same amount of time and energy on increasing revenue, you could be one of the companies to leapfrog the competition in the new normal."

Do you have expert advice to share? E-mail Kristen.