Checklist for Improving your business Cash flow

Cash shortages can prevent your business from meeting its financial obligations and make it difficult to plan for the future and expand your company. It is therefore necess ary to try to improve your cashflow by making adjustments with in your business practises.

Below I have listed certain areas within the business, where adjustments can be made to aid in improving the cash flow:

Sales Related:

-      Increase sales (particularly those involving cash payment)

-      Increase prices especially for slow paying customers

-      Review payment performances of customers

-      Become more selective when granting credit

-      Seek deposits upfront

-      Reduce the amount/time of credit given to customers

 

Cost & Systems

-      Reduce direct and indirect cost and overhead expenses

-      Use the 80/20 rule to manage inventory, receivables and payables

-      Improve systems for billing and collections

Collections/Credit Management

-      Bill customers as soon as the work has been done or order fulfilled

-      Generate regular reports on receivables and aging

-      Establish and adhere to sound collection/credit practices and train staff

-      Use more pro-active collections techniques

-      Add late payment charges where possible

Purchasing

-      Improving systems of paying suppliers

-      Negotiate extended credit from suppliers

-      Use barter to acquire goods and services

-      Make prompt payments when worthwhile discounts available

Inventory

-      Reduce inventory (stock) levels and improve control of WIP

-      Sell off or return obsolete/excess inventory

Financing

-      Use factoring or discounting to accelerate receipts from sales

-      Re-negotiate bank facilities to reduce bank charges

-     Seek to extend debt repayment periods

These are just a few examples of activities within the business that may be utilised to improve the cash flow of your business.