How to Improve Your Cashflow

A business can be profitable and go broke.  The reason – cashflow.

Cashflow is king and the lifeblood of any business.  We have seen a number of businesses over the years where cashflow has been poorly managed with often disastrous results.

We have just acquired some very powerful software tools which assist us in working with you to improve your cashflow management and enable proper cashflow budgeting to be achieved.  We know in our business, where clients take time to pay, it can put a strain on resources.

A couple of simple ways to improve cashflow are:

  • Bill more regularly (if you’re billing monthly, move to fortnightly)
  • Bill immediately after the job/work is completed
  • Get paid in advance!
  • Introduce progress payments for larger work
  • Start chasing debtors 2 days after they are due for payment
  • Put a “due for payment on” date on your invoices
  • Do not issue statements
  • Introduce direct debiting of customer accounts
  • Allow credit card payments
  • Start new customers off the way you want it to be from here on in.

The impact of a couple of these initiatives on cashflow can be profound.  You may lose a couple of customers (who really wants a poor payer as a customer?) but the net result for your business will be positive.

You also need to be aware of the cost of carrying older accounts.  The cost of recovery for poor paying customers can often wipe out any profit on the work. You are effectively financing your poor payers’ businesses at zero interest.

Consider where you have two months’ turnover in accounts receivable at any one time – if you can speed that up by 30 days, it is the equivalent of an additional month’s trading to your cashflow!  All you need to do is get the tools to achieve and manage it.

To have a look over the cashflow forecasting tool we’ve introduced, please call Peter Jacks at our office on 03 5320 1888 or on his mobile 0437 250 212.

Related Posts

Leave Your Comment