Go with the cash flow
Cash flow is a key priority for small businesses, with Dun &
Bradstreet's latest trade payment survey showing payment terms have
reached a three-year high. The average time it takes a debtor to
pay a bill has jumped more than five days recently. While some may
seem simple, the following ten tips could help you:
1. Track cash flow carefully
The sale is not the end of the cash flow cycle. It is important to know when cash from a sale will be received.
2. Consider the terms of credit
State the credit terms of the business carefully. Look at industry norms and assess if a change in your credit terms will suit your business.
3. Prepare for seasonal variations
Cash flows can fluctuate throughout the year so prepare for any financial shortfalls during slow business periods.
4. Pay on time to negotiate discounts
Processing invoices and collecting debts is expensive and time consuming. Help reduce cash shortfalls by negotiating a discount for prompt payment with key suppliers
5. Streamline the supply chain
Don't buy the same thing from multiple suppliers - it is inefficient and time consuming and also limits the power of negotiation.
6. Don't wait to deposit cheques
A cheque sitting in a desk draw isn't doing anything for the business. Deposit cheques as soon as they are received.
7. Roaring sales don't signal an end to prudent cash flow management
A jump in sales can sometimes have an unexpectedly negative effect on cash flow. Increased sales require increased inventory which in turn ties up more cash in stock and ultimately can result in a squeeze on cash flow.
8. Source the right funding
Various types of funding are available to help maintain the flow of cash through a business, including business loans, asset finance and receivables finance, credit cards and overdraft facilities. Choosing the right source of funding for each purpose is crucial.
9. Make the billing cycle work
All businesses are different, but subtle changes can have a significant impact. For example, billing a quarter of customers every week can bring a steady flow of funds into the business, rather than one mass billing at the end of the month.
10. Don't be afraid to outsource
Outsourcing a non-core business function may seem like an unnecessary expense, but it could have a positive impact on the business' cash flow in the longer-term. It will free-up time for business owners to concentrate on tasks essential to improving and growing the business, ultimately bringing more cash into the cycle.
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