Hints for Cash Flow Management

By Trudi Allgood

Cash flow is vital to any business, especially to small businesses looking to grow. Mismanagement of cash flow can lead to potential failure.

Invoice on completion of work.

Ensure you invoice on completion of the job – don’t wait until the end of the week/month. The sooner you invoice your customer, the sooner they will pay. Ensure you have a way for customers to pay immediately if conducting work on the customers’ site. (Card reader; PayID, etc).

Offer discount for fast payments.

If you offer a discount for payment within 10 days, you will find many customers paying sooner to obtain the discount.

Analyse risk.

If you have customers with a history of late or unpredictable payments, prioritise these customers for follow-up. Find out what the customers normal payment terms are and hold them to this (email reminders; phone calls etc). Decide if they are worth keeping as customers if they continue to struggle with payment terms.

Late & High-Risk Debt.

Suggest a payment plan for debtors unable to pay off their debt in a lump sum. Consider using Debt Collection Agencies if your attempts are not getting the desired result.

Suppliers.

Schedule supplier bills for payment on the due date unless there is a discount for earlier payment. Negotiate longer payment terms if they are a long-term regular supplier which you have a strong trading relationship with.

Interest Rates on Loans.

If you have loans, check current interest rates and check your loan type. You maybe able to negotiate a better interest rate.

Drive Sales.

Have a robust sales plan – overlay this against your budgeted expenditure to highlight any cash flow risks. Once aware of the risks, you can plan to mitigate these by activities such as: Short-term sales – Special of the month; Extra discount… or contact customers that are ready to buy.

It costs, on average, 7 times more to sell to a new customer than to an existing customer!