Often businesses find themselves in a position of tight cash flow, minimal cash flow or no cash flow.
Whilst funding from your bank or a lender can often be the obvious fix we’d like to offer some tips that you can do now to improve your overall cash position.
- Review your suppliers, not just the main suppliers of your parts and components but ALL your suppliers. Review your telephone, internet and mobile supplier. Review your electricity, gas and water supplier. Review how and where you buy stationery. Review all the cost lines in your overheads. Any money saved here becomes profit straight away. Any money saved here stays in your Bank account.
- Chase your debtors. Actually asking for the money, asking to be paid helps bring the cash in yet so many businesses fell they haven’t the time for this activity. Even an automated chase (such as Debtor Daddy in XERO) has been proven to speed up payments. Faster payments equals better bank balance.
- Are you paying your bills too quickly? If you have been offered credit terms take them. To pay the bills before they fall due may feel like the best thing to do, but for cash flow, pay them when they are due. The relationship with those suppliers remains good and you retain your cash in your bank account a little longer.
- Review your productivity. A little harder to do as you need to assess overall your business model and how you produce what it is you sell. You need to review your processes and understand if there is a better, more efficient way of doing things. You need to look at your resource (including staff) and ensure everyone is employed to capacity. However, if you manage to sell more with less resource used the cash spent before now stays in the bank.
These are just simple things you can look at within your business to help maximise your use of cash before you need to go to the cost of borrowing. We understand there will always be circumstances that need funding and it would be prudent to do so, just help yourself to be as efficient as you can so that you can make the best profits from your hard work.