Cashflow Finance – Some New Ideas

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Cashflow FinanceCashflow Finance

Cashflow is the biggest headache of any business, it is also one of the most crucial things to ensure you can finance.

Cashflow finance is available in any number of forms, whether that be overdraft, invoice finance, factoring or something else.

The Cashflow Mistake

The first mistake most businesses (big and small) make is that they see cashflow as a finance issue. It rarely is once you get to the bottom of it. The knock on effect is that businesses try and finance their cashlfow before they really understand why they have a problem.

This video guide to cashflow sums up the common mistakes, if you prefer to watch rather than read then grab a fresh coffee and watch this one minute guide;

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How To Improve Cashflow

Once you have your head around needing to look more forensically at the causes of cashflow, it comes to what do you do and how do you start to improve your cashflow.

There is no simple and easy single answer, but we have obtained this guide from David Beckman & Co Chartered Accountants who are based in Ashtead. David Beckman & Co have produced this pdf guide to cashflow, please take a look and use it to benefit your business, download here – Download Guide To Cashflow.

The Main Cashflow Pointers

David Beckman suggests a few pointers about how to improve your cashflow. Take these examples then think about how each applies to your business. In every business the need will be different, so use this as a guide and use it pragmatically.

OK, let’s have a look at some ideas to improve your business cashflow;

  1. Invoice customers promptly, as soon as goods are despatched or services completed
  2. Chase late payers, by telephone initially and then by letter
  3. Spread the cost of larger overheads by arranging to pay by direct debit/standing order
  4. Reduce stock levels
  5. Delay payment to suppliers (but consider the value of lost early settlement discounts)
  6. Send monthly statements
  7. Do not continue to sell to customers who do not pay

There are also a few good ideas around credit control. Every business should have a level of credit control, it isn’t just the big companies that have a credit control function. In many cases the small business is more susceptible to damage by poor credit control than large businesses are.

Cashflow & Credit Control Pointers

The following is not an exhaustive list, it is a series of ideas that are the make up of good credit control. Again, have a look and use what works for you;

  • Check customers are creditworthy before making sales on credit
  • Ask for references and follow them up
  • If in doubt, request payment up front
  • Send monthly statements
  • Prepare an aged analysis of monies owing to you and review monthly
  • Do not continue to sell to customers who do not pay
  • Consider offering early settlement discounts to customers to encourage early payment

All the above is fairly self explanatory but you would be surprised how often it gets forgotten in the grand scheme of things.

Remember that a wise man once said ‘Cash Is King’, that statement remains completely valid today, it will also be valid tomorrow.

If you have any questions about this post, are concerned about your cashflow or want to see how you can finance your cashflow then give us a call on 01293 541333 or contact us via the website here.

By Lime Consultancy