Without a steady flow of cash, your business will run into serious trouble. You won’t be able to pay bills or your staff, make purchases or plan for the future.
Here are ten ways to improve your cash flow and boost your financial efficiency:
1) Forecast your cash flow
It may sound obvious, but it is surprising how many businesses don’t maintain an accurate cash flow forecast. Look at how much cash is coming into your business each month (cash inflow) and how much is going out (cash outflow). With a regularly updated forecast in place, you should be able to identify seasonal peaks and troughs and plan business activities to ensure there is always cash to make payments.
2) Mind the gap
Good cash flow management is all about creating a balance between those cash inflows and outflows. Gaps appear when there is more money going out the door than coming in, leaving your business short. Spot the gaps before they become gaping holes by taking proactive action e.g. chase overdue invoices; negotiate new payment terms with suppliers, etc.
3) Speed up your cash conversion
Convert your products and services into cash as quickly as possible. The sooner you collect cash, the faster you can use it to increase profits or meet financial obligations such as wages or debt payments. Tips for speedier cash conversion include: start sending out invoices immediately after the delivery of goods or services; change your payment terms from 60 days to 30 days and consider offering a small discount to customers who pay their bills early.
4) Make it easier for customers to pay up
Fed up waiting for business cheques to clear? Reduce delays by encouraging customers to make online payments.
5) Create a collections process
Stay on top of overdue payments. Many companies operate a system of reminders that become gradually more serious and formal as invoices become more overdue.
Continue reading the cash flow tips on page two…
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