Manage Your Cash Flow

What is cash-flow

Many business owners will tell you, cash is king. It’s a well-known saying but what exactly does it mean? Simply put, if a business does not have cash coming in and does not turn a profit, inevitably the business will fail. Manage your cash flow is probably one of the biggest oversights in small business operations.

So what does this mean?

If a business does not have money coming in, they are not able to pay their bills and if they dont get good cash-flow coming in to cover expenses a snow ball effect attributes to the whole getting bigger and evently the business will then fold.

Cash is a life line of a business and nowadays more business operators go under because of cash flow problems. The principles of good cash flow management are straightforward. How do you manage your cash flow ?

First, you’ve got to make sure your cash-flow coming in than the cash-flow going out. The business also needs to make sure the money earned is coming in on time so that you can pay your suppliers and purchase more stock.

Managing money and cash flow are critical for small business enterprises but if you can get the basics right, you’ll be in a strong position.

How to stay on top of your cashflow

Credit Control

Setting good terms with your customer is very important, dont give to much away. Negotiate short credit term periods and offer early settlement discounts.

Make sure invoices are done promptly and sent out quickly. The quicker the customer gets their invoice the quicker you will get your money. As it is important to get invoices out quickly it is also very important to follow up on payment is equally important.

Sales forecasting

Have a plan of action. Have clear goals that the business has set and continuous monitoring of how far you still have to go to meet these targets.

Everyone must have buy-in sales is a critical node of an operation and needs continuous oversight and as you monitor the environment around you, you will need to tweak your forecasting to maximise your chances of succeeding in meeting your forecast or budgets.

Cutting Costs

Cutting costs, is one of the easiest ways to save more and improve your cash-flow. Scrutinize all your expenditure from petty cash to travel. There are many area’s where you can cut without creating a negative impact on your operations.

Negotiating Good terms with your suppliers

Negotiate extend credit terms, instead of a 30 day account push for a 60 or 90 day terms. Negotiate early settlement discounts – Push for more than the general 5%. Another way to increase your profit is negotiating on larger deals, dont just except the normal rate. You may find suppliers are willing to negotiate price on larger orders.

Mange Your Stock Correctly

Your operation must manage stock correctly, definitely do not over stock, you do not want a scenario where you have dead stock that you cannot sell that you have paid for.

You must manage stock levels correctly, you also don’t want to be under stocked on you best selling items, not having stock means losing a sale and less cash in the bank.

Keep an eye on your business – Spot the signs

A drop in revenue, customers taking longer to pay and being forced to settle supplier invoices later than usual – these are all classic signs that your cash flow is suffering. Do not ignore the warning signs, there are many ways to increase your cash-flow, before looking at the option of using debt.

Manage Your Cash Flow and Increase your PROFIT

Always negotiate with your suppliers for better prices, negotiate better delivery costs and early settlement discounts
Review your core product line is there room for new products in line with your business.
Sign up standard level agreements with customers
Review your margins on your products, can you increase your margin without hurting sales?
Talk to customers about new innovations in the market – Could your business profit from this?
Keep customers up to date, with email campaigns, courtesy calls, know what your customer wants – Can you upsell to them.