Five tips to improve your cashflow

Cash flow can often be the life force of your business growth and can act as a true indicator of how your business is performing. Healthy cash flow will generally show your business is circulating money continuously through the business.

But sometimes managing or improving your cash flow may seem like a difficult task. Below are five simple tips from the team at Inc.com that can be employed by your business to help bring in money.

1. Perform a good forecast

It's important to have a good understanding of where your cash currently sits and where it will go in the future. If your company is turning in a stage of growth it's not uncommon to underestimate the costs associated with that growth. For example you may need additional employees to help with the growth or perhaps your expenses increase due to more inventory coming in. The more elaborate and well thought out your forecast, the more likely you are to stay on top of where your cash is going and can better position yourself to allocate these resources in the future.

2. Evaluate your terms

Supplying customers with the option of credit repayments is a great way to increase business and attract your product to new customers. However, it's essential that you evaluate the terms you offer in line with the terms you are paying suppliers on. If your business doesn't benefit from a healthy cash flow, the last thing you want is to be waiting for receivables with a 50 day length credit term when you need to make payables with a 20 day term.  Ensure you negotiate an agreement with your customers that will work for both parties.

3. Enforce payment discipline

A good collection process will be the difference to consistently getting paid on time or being forced to make that awkward phone because the debt has become overdue. By continuously following up payments you can limit any damage from overdue debts and pay your own expenses in a timely manner. If you are struggling to enforce your own payment discipline, here is some advice on how to get paid on time.

You should also use your own payment discipline as an example as to how quickly you repay suppliers. A prompt and timely payment to suppliers on a consistent basis could subsequently lead to discounts and offers that wouldn't be available to you if your payments were consistently behind.

4. Segment your customers, suppliers and inventory

In order to improve your cash flow you have to understand the specifics of where your money is circulating. Starting with inventory, by segmenting this category you can effectively review which products are consistently bringing in money and which products are failing to live up to expectation and can allocate or cut funds based on your findings. Next, by closely analysing your suppliers you are able to see which supplier payments were one off purchases and which suppliers you purchase from most often. This way you can focus on negotiating terms and discounts with the suppliers who you pay more often. Finally, by understanding more clearly who your customers are you can determine if they are part of your cash flow problem or solution. For example, it may well be that your biggest customers are also the ones that consistently fail to pay on time.

In addition to this, identifying who your customers are can also be a great exercise in building your marketing activities around.

5. Spread your goals throughout your whole business

There's no point working aimlessly on your own to try and reach your business objectives. Working to complete an objective silently will be a slow process that will ultimately lead to an increased workload. If your main aim is to improve workflow, then that message should be spread down to every employee within your business. By spreading the message, employees themselves will be able to work towards new goals and will feel more valuedto the company as a result.

Want some more information?

Connect with us to receive updates throughout the day:

Like us on Facebok Follow us on Twitter

Dun and Bradstreet AustraliaTop of page Dun & Bradstreet Australia Pty Ltd 2015 | D&B Small Business    *About Us    *Sitemap    *Advertise    *Privacy    *Terms & Conditions