Improving Cash Flow

Cash is the oxygen to any business, when cash moves in and out at a healthy rate, your business is alive and kicking.

When you have negative cash flow, you aren’t making enough money to cover the cost of your operations. Unless you can manage your cash flow to ensure you have more cash coming in than you’re spending, your business will die.

We have provided some practical tips below to help you improve the cash flow in your business.

Quick, easy steps to improve debtor days (Money owed to you)

~ Monitor your debtor days regularly to ensure they aren’t getting longer

~ Raise invoices immediately

~ Consider making your credit terms shorter

~ Set up auto reminders on your accountancy software

~ Enable customers to pay by direct debit

~ Take a deposit and stage payments if appropriate

Quick, easy steps to improve creditor days (Money you owe)

~ Monitor your creditor days regularly to ensure they aren’t getting shorter

~ Try to negotiate better terms with suppliers

~ Set up regular payment runs to settle supplier invoices

Remember though that you rely on supplier’s goodwill and continued supply. You don’t want your account to be put on stop or on Pro-forma payment because you are not paying your bills on time. You don’t want to negatively affect your credit rating so increasing your creditor days needs to be a well thought out process.

Quick, easy steps to improve your stock days

~ Review stock days regularly

~ Identify slow moving stock and look for ways to convert stock into cash

~ Consider holding less stock and increasing lead times

~ Consider asking your customers to hold more stock

Cash flow should be your number 1 Key Performance Indicator. After all, sales is vanity, profit is sanity, but cash is reality. Cash is ‘king’ because without cash, even if your business is profitable, you have no business.