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4 Ways to Increase The Cash Flow In Your Business

Companies / SME Aug 29, 2018 - 03:49 AM GMT

By: Dylan_Moran

Companies

Business owners are always looking for a way to get some extra cash flow out of their business. The formula is simple enough; collect receivables as soon as possible and delay payables without creating friction with a supplier. Some businesses are better at it than others though. Here are four ways to increase the cash flow in your business for anyone serious about doing it properly.


1. Put Together a Solid Forecast
The first step in improving cash flow is learning more about how your financial situation currently stands and where it may go down the line. Small-and-medium-sized businesses are rarely prepared for the costs of rapid growth. More sales means having a bigger inventory and hiring more people, which is money spent upfront. A forecast could be as simple as a pen and paper one for a small company, but larger companies will want to go a little more advanced and map out what they expect to happen over the next 12 months.

2. Evaluate your Terms
If you’re having cash flow problems, then you should check to see how balanced the terms you have with your customers and suppliers. Evaluate the terms offered to customers and decide if they are working well for you. Check to see how the terms a supplier offers stacks up to other suppliers in the marketplace. Perhaps you could get a discount by paying earlier, which can help even though it sounds counterintuitive to pay sooner.

3. Payment Discipline is Key
Shortening the receivables period begins with having a solid collection system in place. How long are you taking to get paid? Do you have enough contact with customers? Are disputes identified and settled quickly? You need a solid invoicing solution on your side to ensure invoices are perfect each and every time to prevent delayed payments. There are lots of great invoicing solutions out there, including InvoiceFinancingAustralia.com.

Paying suppliers on time is as important as being paid on time by customers. It will allow you to negotiate better deals in the future and potentially increase your cash flow.

4. Segment Consumers, Suppliers, and Inventory
You likely won’t get too far if you try to tackle everything as a whole. It’s better to segment customers, suppliers, and inventory and work from there.

Assess the volatility of sales when looking at inventory. Are you putting too much money into products that don’t sell too well? Would it be worth taking that money and investing it into more popular products?

Further divide suppliers into regular suppliers and one-off buys. You have a better chance of negotiating a good deal, including better terms and discounts, with a strategic partner.

The customers are the most important things to look at. Who are your key customers? Someone isn’t necessarily a key customer because they’re big spenders. It may turn out that your biggest account is actually also your biggest money loser. Put together strategies to encourage customers to pay on time and manage those who regularly dispute invoices. The key is to provide a better service to clients.

It doesn’t have to be as difficult as you think to boost cash flow and get more money out of your current resources. Take the idea and make it a company wide policy. Get everyone in on the plan, and see what big results you get from these small steps.

By Dylan M.

© 2018 Copyright Dylan M. - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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