Q: "I’ve heard the famous saying ‘cash is king’ many times. How do I maximise the cash flow of my business?” This is a very popular saying, but for good reason. Most businesses go bust not because they make losses but because they run out of cash. In the current economic climate, cash is vital to the survival of any business. Here are my three key steps to maximising the cash flow of your business: Credit controlYou should devote more attention than ever to the amounts owed to you by customers. If you normally look at this once a month, you should now be looking at it once a week.
Regularly call your customers and ask them when they will be sending payment and, if they miss that deadline, call them straight away to find out why. One of the biggest risks to your business during the next 18 months will be potential bad debts. A moderate bad debt could wipe out any profit that you had hoped to make in the year. One of the first warnings of a customer in trouble is when they ask you for "a little more time to pay". Always think twice before agreeing. The examples of Woolworths & MFI show us that nobody is safe and that even so called "blue chip" customers may be a bad debt waiting to happen Always know your bank balanceAt the beginning of each week, you should know how much is in the bank, and what the main payments expected in and out of your account will be for that week. At the end of the week, check that the balance is what you expected. If not, find out why. Negotiate with suppliersEveryone is keen for business at the moment, so there’s no better time to negotiate discounts and other favourable terms with your suppliers. Always ask for a discount or for their best price – you’ll be surprised what you can save. Finally, never pay your suppliers early. But do settle them promptly. This ensures that you maintain a good relationship with your suppliers as they will appreciate those customers who pay on time, and you will see the benefits of this strengthened relationship when the economy does pick-up again. Related articles"Do I have to pass on the VAT cut to my customers?""What’s more tax efficient: salary or dividends?" "Should I start making redundancies?"
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