Overcoming Cash Flow Hurdles: Effective Strategies

In case you haven’t been aware of the recent high inflation rates impacting business costs, let’s get you up to speed. There are solutions to unlock funds without disrupting your operational capabilities. Here are some suggestions:

Debtors

Many businesses unknowingly extend free credit to customers for extended periods. It’s a common occurrence, especially for owners hustling to keep the business running smoothly. To fix this:

  • Send out invoices pronto. Efficient invoicing equals future cash flow.
  • Invoice along with goods or services, dated from completion rather than month-end for faster payments.
  • Consider shorter payment terms like 7 or 14 days from the invoice date.
  • Politely but firmly follow up on overdue payments.
  • Keep track of Accounts Receivable and set monthly targets to reduce the average age.
  • Offering discounts for prompt payment can be a good option for high-margin operations.

Stock

Excessive capital tied up in stock can hamper finances. Review:

  • High levels of items that could be obtained quickly from suppliers.
  • Revisit stock turnover rates and purchasing policies. Sell slow-moving stock or consider discounts for quick sales.

Pre-paid Expenses

Explore payment options for services like insurance or utilities:

  • Divide substantial annual bills into manageable monthly payments.
  • Average out utility bills to avoid seasonal spikes that disrupt cash flow.

Fixed Assets

Evaluate the full utilization of assets:

  • Sell underused assets and rent as needed.
  • Consider selling vehicles and leasing instead.

Suppliers

Negotiate extended payment terms or split orders for flexible payment terms.

Customers

Tap into customers for business funds:

  • Propose using credit cards for purchases, allowing quicker cash flow.
  • Consider invoicing for progress payments during projects to ensure steady cash flow and reduce risk.

Next Steps

  • Assess your exact cash needs, especially if seeking additional finance.
  • Seek expert advice from professionals like East Partners.
  • Cut expenses and tighten credit policies.
  • Research various options like low-interest bank loans or equity-dependent assistance to bolster cash flow.

Tackling cash flow challenges requires strategic moves and professional guidance, but it’s within reach!

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