10 Steps To Improve Cash Flow For Your Business

Sept. 6, 2009 - PRLog -- 10 Simple steps to improving the cash flow in your business

1.  Watch Cash Flow Daily

Most business owners are used to judging their business performance by looking at Profit and Loss.  The P&L statement does provide good solid information on the health of the business.  But in these days of Cash Crunch a cash flow statement is far more important.  Look at your cash flow daily.  Put it at the top of your To Do list each day and bear it in mind throughout the day.  Ask yourself, "What will this decision do for our cash flow?"

2.  Collect Cash - NOW!

It's stating the obvious but collecting what's owed to you is often a great first step.  Look at those unpaid sales invoices, find out why they've not been paid and assign responsibility appropriately.  Get the right person to sort out the problem and don't just leave it to the credit controller in accounts.  It may be something simple like 'send a copy', or a quiet reminder on the phone, or it may be something more serious.  Find out today and do something positive NOW.

3.  Reduce Costs

This is the knee jerk answer to lack of cash:  cut costs to match the falling income.  But as the weeks go by it may become clear that such a move was cutting your own throat.  Think very carefully about what you are spending your money on.  Does it make sense?  Does this expenditure contribute to sales?  If you do decide to reduce expenditure, make a detailed plan - and tell everybody about it, so that they understand and work with you.

4.  Negotiate a Better Deal

Cutting the cost, paying less, does not always work.  Cheap is not necessarily good.  It's better to look at 'value for money'.  Can you get more for your money and make your business more efficient as a result?  Remember, the businesses you're dealing with are having the same problems.  They don't want to lose your business and they will talk constructively to maintain your custom.  Negotiate on price, specification and delivery - and don't forget to ask about payment terms.  For you, 60 days is better than 30 days, but don't cut their throat in the process.

5.  All for One and One for All

Make sure everybody looks after cash flow.  It's not just the accounts department that is responsible for cash in the bank.  Get your managers and all staff to think about cash.  If someone's delivering to a customer, can they collect a cheque whilst they're there - saving the customer postage - and you get the cheque in the bank faster?  Ask your sales team to consider cash too.  They may negotiate a great sale, but when will you get paid - will you get paid...or will that new customer have gone bust by then?

6.  Use it or Lose it

This is not something that everybody can use but it's worth asking the question, particularly in the run up to the end of the tax year.  Do you have customers with 'use it or lose it' budgets?  Where the answer is 'yes', speak to those customers and ask what you can do to help them.  Find out how their financial budget works and come up with a mutual back-scratching solution.  Don't wait until April - find out today!

7.  Use Assets Wisely

Look at your fixed assets.  Do you need all those vehicles?  Are your premises being utilised to the full?  Watch your stock levels too.  Having stock sitting on shelves is parking cash to collect dust.  Think about what stock and assets generate cash.  Make those that generate cash work harder for you - and consider ditching the rest.  If an asset isn't earning money, why is it there?  If stock isn't selling, why is it not selling, and do you need that stock?

8.  Change Your Charging

I used to say "why bill monthly in arrears, when you could bill quarterly in advance?"  There was a lot to be said for that in the cash-rich past and certainly if you can go down that road now it is worth doing.  However, your customers are probably cash poor too and consequently won't want an enormous bill at the start of the quarter; they may walk away.  Consider periodicity as a way to make it easier for customers to pay.  Small monthly bills, even in advance, may make life easier for your customers - making it easier for you to keep them coming back for more.

9.  Outsource

When cash is in short supply and the future may be uncertain, investing cash in new machinery may be unwise, but you still need to produce the goods.  New people, with full time salaries, are costly investments especially when you add in all the associated costs.  Consider outsourcing some of your production to someone who has spare capacity or machinery lying idle.  You'll still be able to get the work done, but you won't have such a big cash commitment.  Outsourcing aids flexibility too, allowing you to respond to the changing environment.

10.  Live the Life

They say that actions speak louder than words.  As the boss, you need to lead by example.  Don't just tell your staff what needs to be done - do it yourself.  When you're out meeting customers, bring back a cheque if there's one to be collected.  Travel economy, not business class.  If you live the life you're asking your staff to live, they'll follow you and you'll all be successful together.  Whatever you do, don't sit in your ivory tower avoiding the pain whilst making them suffer because, before you know it, you'll be very lonely - and broke!

Payment Automation Network Inc. is dedicated to increasing cash flow for medical providers and businesses.  We offer a FREE REPORT on improving your cash flow. To claim your FREE copy of report, visit our website:: http://www.PaymentAutomation.net

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Your Cash Flow Is Our Business

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