Simple Ways Of Improving Your Business Cash Flow

Sometimes you just can't predict your cash flow, even if you have an accurate forecast from your finance department. In some sectors, such as retail, there are often nuances that cause a boom or a bust in customer figures, and sometimes we have no idea why.

While the finance department are trying to forecast cash flows, what you can do as a manager is try to improve it throughout the business. You don't need to get too technical and you don't need to have great financial knowledge - a lot of it is common sense! Here are the most common ways to improve your business cash flow:

Invoice as soon as money is due

Granted, everyone in business is often extremely busy, but if your department takes a month to bill a customer for services you've provided or a product they've ordered, then that's a month's interest down the drain - and a month gained on the side of the customer.

Over a long period of time, this will not only add up to quite a lot of cash thrown away for the sake of being late, but will also instil the culture that you're a late invoice and therefore not too bothered if they don't pay on time, either. This leads us to the next point...

Reward customers if they pay quickly

Sometimes getting an invoice paid on time is like pulling teeth - after all, your customers will be trying to manage their cash flow better, too. Some companies offer an incentive for settling the bill quickly - it doesn't have to be much, say a 1% discount, but this will help you get the money turned around from sales a lot faster.

You don't have to take bad custom

"Bad custom?" you're probably thinking. "Surely there's no such thing?". That's not entirely true. Just because someone wants to purchase from you or use your services, it doesn't mean that they are a 'good' customer.

Imagine if a company wanted a small order that resulted in a small profit for you. That's fine if they pay on time. If they don't, then you're spending administration time and money sending out reminders, and losing interest while you wait. Depending on the size of the profit, it could even get eaten up with the costs and inconvenience of chasing them.

How can this be avoided? Do as the banks do - learn who is notorious for having 'bad credit' by doing a little research, perhaps asking your contemporaries if they've ever had any problems. Don't be afraid to refuse custom if it's going to cost you more than it's worth to keep them.

Stock check as well as stock take

You may have a wide array of products or services, but are some of them less popular than others, but are still costing you money to advertise? If you were a wine merchant and only sold one bottle a year of a certain vintage, it may be costing you more than you think to have it on the wine list, to keep it in storage, and to check prices on it. If you offer a service that is rarely taken up by customers, then why not remove it from your "inventory" of offers and concentrate on what is more popular and what will bring more cash in?

These simple steps won't take long to do - but will save you money in the long term. Naturally, there won't ever be a manager - financial or otherwise - who would be against the idea of saving money. Now you know how to do it via your cash flow, so why not start today?