One of the most important elements that keep a company stable is good cash flow. Cash is needed to pay employees, suppliers, rent and other overheads. It’s fundamental for keeping a company afloat.
Top 10 tips for keeping a good cash flow
- Create a budget – A detailed budget is incredibly useful for planning your cash flow. If you know what and when money is coming in, you can plan what you are able to spend.
- Monitor the results – A budget is only useful if you use it to track your progress. By monitoring the budget you can adjust it accordingly, whether that’s you exceeding or falling short.
- Have a “Plan B” – By using your budget and your results, you should have a plan in place if your budget is not hit. For example, you could reduce costs or increase marketing spend.
- Maintain some cash reserves – This is easier said than done but it is definitely useful to have some backup cash. As we would aim to put some money away in our personal lives, you should aim to do the same in business. A “rainy day” fund shall we say.
- Invoice quickly – This is something that is incredibly important. You must invoice quickly. If your invoices aren’t raised and sent out as quickly as possible, how would you expect the money to come in quickly?
- Collect receivables ASAP – You shouldn’t wait for your customers to pay, you should take measures to remind them they need to pay. Send regular statements, resend the invoice if needed and simply phone them to make sure they are able to pay on time.
- Encourage customers to pay faster – If your margin is big enough, you could offer discounts on invoices if they are paid before the usual due date.
- Extend payables as long as possible – Quite the opposite to receivables, you want your payables to have even greater credit terms than you are offering. This way if you experience payment delays from your customers, your relationship with your supplier won’t be tainted. Plus assuming all goes to plan, you’ll have the cash in hand first when your suppliers’ invoices are due.
- Boost sales with creative incentives – The sales team are the ones responsible for bringing in the business but don’t forget current customers and other areas of your company can bring in business too. Perhaps a referral scheme could be put in place to increase business.
- Use technology to your advantage – Keeping up with technology is key. Generally, advances in technology can make your business more productive, meaning you can spend more time getting more business in and making sure invoices are paid. An example of a good technological advance is online bookkeeping software providers delivering subscription services. The new systems are very useful and quite often come with automatic credit control, saving you time emailing overdue invoices and statements.
We at CMR have been providing support to SMEs for over 25 years by supplying a managed credit insurance policy and debt recovery services. The fact that we are an SME ourselves means we are small enough to relate to each and every customer but large enough to support them with all of our resources.