Top tips for keeping cash flowing
Keeping a strong and steady flow of cash running through a business is critical to any firms long term success, enabling the company to pay its staff on time, fulfill new orders, purchase raw material and even new equipment.
But maintaining a healthy cash flow is not always as straightforward and easy as many owners and managers believe.
To help entrepreneurs improve their cash flow management Bibby Financial Services has developed the following 10 top tips to keep the cash flowing in your business:
Credit check potential customers
Always run a credit check before entering into any business relationship. Aim to only trade with companies that you know are not only creditworthy, but also have a good track record of paying their bills. It may also help to set your customers realistic credit limits.
Have clear 'Terms & Conditions'
Be clear with your terms and conditions of business. If your business terms are seven days or 30 days, make it clear. Set out your terms of trade early on. Include them with order confirmations and invoices.
Always check your invoices
Avoid invoices being returned by addressing them to the correct department and a named individual if possible, including details of the job, a purchase order number, the correct amount, your business terms and a date.
Send that invoice
Don't delay issuing invoices. You should send your invoices immediately on completion of the job and follow them up with a phone call to check if they've been received and that all details are correct.
Be strict with credit control
When it comes to credit control, don't be afraid to adopt a follow up system that involves issuing statements and reminder invoices. Call your customers if their payments are late.
Pay attention
Are your customers acting differently? Are they suddenly hard to get hold of? Are they sending you post-dated cheques? This can often be a sure sign that something is happening. Remember - forewarned is forearmed.
Limit the stock you hold
Holding stock means that your cash is tied up so plan ahead and don't hold too much stock. Investigate the possibility of more frequent deliveries from suppliers so that stock levels can be kept to a minimum.
Manage your suppliers
Shop around to make sure you are getting the best deal with suppliers. Also negotiate longer credit terms and volume discounts to free up more cash to reinvest in the business.
Keep people in the picture
remember to communicate with all the key people involved in your business including your bank manager, suppliers and customers. If you tackle issues early on they don't develop into business problems later.
Keep the cash flowing
Review your funding to ensure that it is still meeting the needs of your business. It may be beneficial to take a fresh look at the alternative solutions available. Invoice Finance is one such solution that can guarantee your business has a flexible supply of working capital.
Commenting on the cash flow tips, David Robertson, chief executive of Bibby Financial Services, said, These tips on keeping cash flowing may seem obvious on reflection, but many companies get bogged down and forget to apply these simple rules. Remember you may have won the order but getting paid is just as important.
About the Author
Bibby Financial Services help businesses to resolve cash flow issues with a range of financial solutions. Find out more on their website.
Posted July 27, 2007
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