Many companies fail due to issues regarding cash flow.
That said, your business doesn’t have to be one of them. In fact, when managed well, cash flow can be an amazing tool to help your company succeed and grow!
Keep reading to discover 10 tips on how to improve your company’s oil and gas cash flow!
1. Set up A Cash Flow Budget
Knowing where your cash flow goes is key to improving it.
Set up a budget for your finances to help ensure your all funds are going to where they need to. This way, all areas of your company can thrive to their maximum efficiency.
Also, don’t allow the spending budget to consist of all of the earnings. Instead, set some aside to give your company a wider margin of error in case you encounter an unexpected expense.
By creating a strong budget plan, you’ll be setting yourself up for better business cash flow long-term.
2. Fine Tune Your Plan
If your current cash flow model isn’t working as well as you’d like, fine-tune it to make it better. Do more of what’s working well and improve on your budget’s trickier areas.
If your business is large, consider hiring a team of financial experts to advise you in this matter.
Look for people who have good experience in the finances of other successful companies and also have an attitude that is both realistic and enthusiastic.
This way, you will always have access to the knowledge your business needs to help make wise decisions for your oil and gas cash flow plans.
3. Set Up An Emergency Fund
While profitable, oil and gas can be a very competitive industry. And like all other industries, chances are you’ll hit a rough patch at some time or another.
These rough patches have the potential to make your budget plans go awry and can significantly hurt your oil and gas cash flow. However, if your business is well-prepared, your company can still stay strong.
Just as you would for yourself, consider setting up an emergency fund for your oil and gas company as well.
These earnings help your business cash flow remain uninterrupted during a rough season, allowing you to improve your cash flow rather than having to start over when business goes back to normal.
Additionally, the more cash flow you set aside, the more you’ll have available for business investments.
4. Maintain A Positive Company Attitude
Positivity is essential to your business cash flow because it affects every part of your company.
By promoting positivity, you’re inspiring greater enthusiasm throughout your workforce, encouraging more innovation and ideas to be shared, and making a positive impression on potential buyers.
Here are five tips for maintaining a positive company attitude:
- Recognize problems, but keep a solution-focused mindset.
- Choose a team with people who can be both optimistic and realistic.
- Set and achieve small company goals and build up to larger ones.
- Get adequate rest in order to think clearer and be more creative in solutions.
- Promote a positive working environment and discourage negativity.
While not tied directly to numbers on your cash flow model, positivity and enthusiasm can still have tremendous benefits on your business’s finances.
And an increase in creative and innovative ideas can potentially lead you to discover more cash flow solutions and wise investments that can help your business grow.
5. Optimize Your Marketing Strategies
Speaking of investments, once you’ve got a working cash flow plan in place, seek to add to it.
Marketing is one of the most popular ways to improve business cash flow because more customers equal more earnings. However, before you invest your cash flow in this endeavor, first consider and optimize your marketing strategies.
To gain the best return on your marketing investment, think about the following questions:
- Who are your target customers?
- What kind of advertising interests them most?
- What platforms do they use?
Also, be wise in choosing your investments as well. Some forms of marketing, such as a social media account don’t impact your cash flow unless done on a larger scale.
And inbound marketing techniques, such as blog posts, can stay on the search engine for years to come, making your business more findable long-term.
6. Be Wise With Loans
Loans are a way to jumpstart business cash flow because you can quickly gain the funds you require.
However, though you can gain cash flow quickly, loans also have the potential to hinder your business when done incorrectly.
Make sure to avoid taking out more than you need. Often it is better to start your smaller and steadily build up over time. This way, you can save money and reduce risk.
If you decide a loan is the most profitable way to go for your company, then make sure you have a plan as to where the funding will go and be certain that the investment will be profitable.
This funding method may also require you to set up collateral.
Meaning, if your business fails on loan repayment, then you can lose any investments you included, so make sure to find a payment plan that does not take up to much of your budget.
Only obtain loans from reputable companies that offer fair and honest financing options.
7. Consider Getting Investors
Investors can increase your cash flow significantly in exchange for a certain percentage of ownership and profits in your company.
However, not all offers are good for both you and your business.
The key to this funding method is to find a deal that is fair and profitable for both you and your investor.
8. Promote Efficiency and Productivity
Regardless of your cash flow number, efficiency is key to making it work the way it’s supposed too and benefit your company most.
Companies lose around $160 billion dollars each year due to sick days. And business routines get interrupted each time they happen.
However, happy, healthy workers are more likely to be more productive.
Streamline your business processes and make your cash flow the most effective by encouraging healthy habits and efficiency.
If your business provides lunch options, ensure these options are healthy and good. Also, consider setting up an exercise room or provide benefits such as free gym memberships and easy access to additional company training resources.
While this may seem like a small aspect of your cash flow, remember that small efforts add up and can lead to a positive impact over time.
9. Learn From Others Mistakes And Seek Insight
People make mistakes all the time, and chances are your competitors have at some time or another, impacted their own cash flow due to some errors of their own.
This gives your company a great opportunity to avoid common cash flow problems by paying attention to what has been working well in your industry and what causes companies similar to yours to fail.
Also, consider getting advice from other successful companies in your industry (that are not competitors). This way, you can gain expert insight and have more knowledge so you can to make great cash flow decisions.
10. Be Wise With Investments and Upgrades
To maintain adequate cash flow, be wise in the way you use it. When selecting an investment or upgrade, consider the following questions first:
- Is it needed at this time?
- How will the cash flow be impacted?
- Are there any significant risks involved?
If the investment comes with high risk or isn’t necessary, then consider looking at alternative options or waiting until a later time when your cash flow is increased.
By being wise in your investments, you are improving your oil and gas cash flow and keeping it more steady.
Final Thoughts on Oil and Gas Cash Flow
Improving your oil and gas cash flow is not at all an impossible task. And by applying the tips mentioned above, you will be setting your company up for cash flow success.
However, the best kind of success happens when you are consistent and don’t give up. And while your cash flow may not soar right away, good financial habits have a great pay off that is worth it in the long run.
We specialize in providing capital to independent producers. If you have any questions about our financing options, be sure to visit our FAQ page or contact us!
We’d love to connect with you and help you obtain the capital you need.