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Cashflow freedom – The 7 causes of poor cashflow

Mark Greer. BUSINESS PLANNING

Cash is the life blood of any business. In fact, even profitable businesses can and do fail because of poor cashflow. What’s important is that you understand your key cashflow drivers. Improving cashflow is often all about changing your business processes. Processes such as how you order stock and pay for it, how you bill […]

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Smart Strategies to Control your Cash

Posted 12 months ago in BUSINESS PLANNING

Cashflow is confidence – the more you have the better.  Try these ideas to control your cashflow better.

 

  1. Set your terms of trade at the outset of each job and have your customers sign off on them.  Terms should include when you expect to be paid and your ability to add interest and debt collection costs onto any outstanding amounts.
  2. Stick to your payment terms.  Don’t let your customers pay you late.
  3. Use a contracted debt collector on slow payers.
  4. Set aside a percentage of all cash you receive into a separate bank account to cover your tax payments.  Ask us what that percentage needs to be for your business.
  5. Manage your work in progress by billing regularly, reducing the number of jobs you have on at one time and setting budgets for your team to stick to.
  6. Only hold enough stock to cover the time it takes between the sale of an item and when you can get delivery of the same item.
  7. Measure how long in days on average it is taking to sell each stock item and reduce obsolete stock.  You’re better off to convert that slow moving or obsolete stock back into cash and reinvest it in faster selling stock.
  8. Finance the cost of fixed asset purchases using over terms similar to how long the asset will last before it needs replacing.
  9. Set a budget for income and expenses each year and stick to it.  If a new cost is not in your budget then find a saving somewhere else.
  10. Build a ‘war chest’ of cash in your bank account to cover at least one month of expenses (ideally more).

 

Which ideas can you apply in your business?
Talk to us about what else you can do.

 

You must gain control over your money or the lack of it will forever control you – Dave Ramsey

 

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