Over the past few articles, we’ve worked through an example of where cash can disappear to so now let’s look at some ways you can manage your cash to ensure any increases in profit also result in an increase in cash. There are literally hundreds of ways to improve your cashflow. As part of our Cashflow Management Coaching service, we focus on how to improve your cashflow with practical and proven strategies relevant to your business.
Here are just a few ideas:
- Make sure you have a robust process for debtor collection and ensure you adhere to it. Consider outsourcing your debtor collection to a third party, such as Debtor Daddy.
2. Communicate your Terms of Trade from the beginning. Contact customers the day their invoice becomes overdue. Be persistent with your contact and try different methods, for example, phone, email, and letters.
3. Get credit references or personal guarantees from customers, set credit limits and require cash on delivery.
4. Regularly monitor stock levels and get rid of obsolete stock.
5. Ensure you understand buying trends so you can plan for quieter times.
6. Create a personal budget and stick to the monthly drawings amount.
7. Consider financing asset purchases instead of paying cash outright.
When it comes to managing your accounts payable, make sure you:
1.Have a purchasing system so you only purchase what you need.
2.Ask for extended credit terms where possible. Ensure you’ve built a relationship with the creditor and always pay by their due date. This will help when negotiating extended credit terms.
3.Communicate with your creditor if an issue has arisen which has meant you can’t pay by the due date.
4.Negotiate to ensure you have the best terms possible.