10 Tips to improve your cash flow

10 Tips to improve your cash flow

Cash Flow Management

Cash flow is one of the main concerns impacting businesses in NZ today. With the global financial crisis now thankfully behind us, there is still a more reserved confidence in the market to that that existed prior to 2007.

Even organisations experiencing significant and sustainable growth are finding they are faced with a range of difficult challenges. None more so than cash flow management.

Cash_Flow_514pxTo help all businesses better manage this key aspect of their business, here are 10 tips to improve your cash flow and ensure your business has the necessary means to achieve its goals.

  1. Know when receivables are due. Review your receivable’s aging report to assess your customer’s payment habits. Regularly follow up with late-paying customers.
  2. Tighten up credit terms. Extending credit to slow-paying customers can lead to cash flow problems. Negotiate new terms with existing customers who have been slow to pay, and set stricter terms for new ones. Always get a credit check credit on customers before extending credit.
  3. Conserve cash. Keep more cash in your accounts by staying on top of when your payables are due for payment. Don’t pay early unless there is a cash incentive to do so.
  4. Work with your vendors. If all of your payables come due around the same time, you are more likely to end up with negative cash flow. Talk to your vendors and see if you can stagger payment dates or extend payment terms to help your cash flow. Maintain good relationships with vendors, and they’ll be more willing to help you out.
  5. Harness technology. Accounting tools such as Xero, MYOB, Banklink and QuickBooks can simplify cash flow management and allow you to monitor your inflows and outflows at a glance.
  6. Send out invoices promptly. Customers can’t pay you if they haven’t been billed. Send invoices along with the shipped product, or as soon as a project is completed.
  7. Make it easy for them to pay you. Make sure key information, such as how to make payment, amount due and date due, is clear and easy to read. Contact the customer to verify the address, department and person the invoice should be sent to so there’s no chance for error.
  8. Keep a tight handle on inventory control. If you’re a seller of products, ensure you have sound systems to manage your stock and stock turnover. One of the biggest dangers in businesses is being over stocked.
  9. Review your numbers regularly. Ideally, you should monitor your sales and expenses daily. At a minimum, monitor your accounts receivable and accounts payable listings and age reports monthly, measuring your average collection periods carefully.
  10. Have a backup plan. Sometimes businesses run into cash flow problems through no fault of their own, so it’s always wise to have a source of quick cash you can access in case of emergency.

Why is cash flow so important for company growth? Simply put, money, specifically cash, makes the business world go round.

 

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