How to Improve Your Cash Flow

Cash is key in every business Budgeting and Collecting are not exciting but they are both the answer to a successful business

Here are ten ways to improve your cash Flow

1. Bill promptly
Bill early and often – Put together a billing schedule and stick to it.
The faster you invoice your customer, the quicker the customer will pay in order to keep to the terms you both agreed.

2. Offer incentives for early payment / Penalise for late payment
Chances are customers will pay early if there is an incentive in doing so. Offer a percentage off for payment within days of the invoice date. The customer will have to pay at the term date so it is win –win for both you and the customer. This also keeps good customers as you have provided an incentive for them to continue business with you. By adding interest to your invoices and statements after the due date has passed will make customers pay up quicker.

3. Avoid slow pay / no pay customers
Check your customers out! Have a system in place and ask for credit references. Run a credit check on potential customers. Running checks when the problems arise is too late. The best way to avoid cash – flow problems is to let it begin.

4. Accept debit & credit cards
This is a simply way to increase your cash flow. Having the convenience of this can allow the customer to pay immediately. You need to compare and negotiate rates with the banks for charges.

5. Stretch out your payables
Take the maximum time in your terms to pay your suppliers. Think of these terms as an interest free line of credit from your supplier. This will give you enough time to collect your receivables.

6. Reduce your stock
Overstocking inventory can tie up considerable amounts of cash. Avoid buying more than you know you need. Do not let suppliers tempt you with big discounts. Check your inventory for old and outdated stock either uses this stock quickly or sell it at cost price.

7. Renegotiate your insurance and supplier policies
Are you getting the best possible deal on insurance, phone, Internet and other regular business expenses? Review your insurance policies each year getting quotes from other companies. Regularly examine bills and call other companies to ensure you are getting the best rates. Consider every expense.

8. Use assets wisely/ Consider leasing instead of buying
Take a look at your fixtures, fittings, equipment & Vehicles. Do you need it all? The more assets you have running the more costs will arise with breakdowns and servicing. Are your premises being utilised to the full?
Leasing generally costs more than buying however the costs often can be justified by the cash flow benefits. By leasing your assets you will avoid tying up cash that can be used to run your day-to-day business.

9. Check your pricing
Have you kept your pricing in line with the increasing costs? Many businesses are afraid to raise prices as they may lose customers. However check what your competitors on a regular basis and if they are charging higher prices so should you.

10. Put cash on deposit / consolidate your loans.
No point in having cash sitting in an account that does not earn you some return. As cash grows consider moving some of the cash into deposit & savings accounts.
If you also have several loans related to your business, it is important to review the terms and rates on each loan. You may be able to consolidate your loans into lower interest rates accounts and this will in turn improve your cash flow.

 

 

 

 

 

 

 

 



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