Want to Avoid a Cash Drought?

Use these quick tips to ensure you always have a Cash Torrent!

 
Consider where and how cash is involved in your end to end Sales Cycle and fix EVERYWHERE for remarkable improvements.
 
Nearly everyone we speak to has a cash flow issue of some type, and more often than not there are quite quick and easy fixes.

Firstly – keep it simple

* If you have co-mingled personal and business finances – stop ASAP! Start keeping your records clean and tidy.
* If you are robbing Peter to pay Paul – stop this too!! Start keeping your records clean and tidy.

This isn’t to say don’t lend your business money, but it does mean doing so in a structured and transparent way. It also includes paying yourself in a structured and transparent way. Good record keeping, and therefore being absolutely clear about what is flowing where, is the only way you can gain real cash clarity and see what is going on. It isn’t until you can SEE where the issues lie that you can begin to FIX them.

Secondly – think broadly

Next approach Cash flow using all 5 aspects of your business. Don’t just blame the customers for being slow payers – look at your business systems and processes too – this is extra useful as you have lots of power to change and improve your own cash flow, and as you will be painfully aware, almost no power for influencing the exact date of invoice payments. **
Consider how each of these areas impacts on

  1. Customers
  2. Staff
  3. Systems and Resources
  4. Process
  5. Suppliers and Inventory

1. Customers – 3 ways to improve cash flow now:
  • Vet your customers – do credit checks
  • LISTEN LISTEN LISTEN when signing up a new customer – what are they looking for in this deal and why? How will their expectations affect your business and cash flow?
  • Have a pipeline and back-up relationships – don’t get stuck because your biggest customer has just shut-up shop or gone elsewhere
[box type=”note” style=”rounded” border=”full” icon=”empty”] **
The best way to reply to the “I can’t pay the full amount right now” response is to ask:

‘Well – how much are you short?’

Customers generally do not want to lie to you.
This approach empowers you to receive what they have available, and arrange a part payment plan for the rest! For more information on debt collection see Ask the right question[/box]  

2. Staff – 3 ways to improve cash flow now:
  • Motivate your sales and delivery staff to decrease customer issues – happy customers pay on time
  • Ensure your Sales people are well briefed on your payment terms and check they advise customers clearly to decrease customer issues post sale.
  • Staff Bonuses don’t have to be cash! – get creative as to how to motivate staff in non-financial ways

 

3. Systems and Resources – 3 ways to improve cash flow now:
  • Use the most up-to-date systems and resources for accepting money – regularly review for best practice. eg
    use a wireless eftpos instead of a “click clack” credit card imprint machine
  • Use an sales and debtor tracking system that is appropriate for your business – don’t try and keep ‘who owes what’ on the back of a scrappy piece of paper
  • Factor (sell) your worst debtors – at least a % will come in the door

 







 

4. Processes – 3 ways to improve cash flow now:
  • Create clear payment rules in your Terms and Conditions and ensure every new customer receives a copy
  • Re-publish your payment terms regularly to all customers
  • Stick to the process – send out bills on time, follow them up on time etc. – if you waiver here then you are breaking your own terms and conditions AND setting a bad example for customers to follow

 

5. Suppliers and Inventory – 3 ways to improve cash flow now:
  • Negotiate better terms with suppliers, and review annually – if your debtors are slow, match your credit days with your debtors days
  • Do the maths re supplier discounts – make sure you are not getting a 5% discount that is costing you 15% to fund as it is going on the overdraft, or that a bulk discount will not be eroded by extra storage costs
  • Decrease inventory

 

Cash flow is the lifeblood of your business;
Never continue to work for Bad Debtors

– your time is better spent generating new PAYING customers than making DONATIONS to bad customers!
 
 [box type=”info” style=”rounded” icon=”empty” border=”full”]

About the Author

Eve Blackall Smart Accounting image
Eve Blackall the small business answer to The Supernanny.
At Smart Accounting you work one-on-one with Eve who has already assisted hundreds of business owners increase cash-flow, grow profits, also ensuring those businesses fetch the highest price when it comes time to sell.[/box]