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5 Ways to Improve Cash Flow

5 Ways to Improve Cash Flow | Cash Flow Management | Scoop.it

If you’re looking for a quick fix for cash-flow problems, good luck. But if you’re serious about making strategic changes, read on.

 

SIMPLE FORMULA: collect your receivables as fast as possible and slow down your payables without jeopardizing your relationship with suppliers.

 

If you're just looking for a quick fix, you can extend your accounts payable period by using a credit card to pay suppliers. With a check, you only get a day or two of float – or the time between when someone deposits your check and when the amount is removed from your account. But if you pay with a credit card, your vendor gets paid and you don't have to pay the card down for several more weeks. Of course, you don't want to charge more than you can pay off in a month or you'll get slapped with some hefty interest charges.

 

That's a simple – and fairly short-sighted – solution. But if you're serious about improving cash flow, here are five tips.

 

1. Perform a Good Forecast

 

Quite often small and mid-sized businesses aren't prepared for all the costs associated with growing quickly. More sales could mean more employees and a bigger inventory.

 

2. Evaluate Your Terms

 

If you're having trouble with cash flow, check to see how well your customer terms and supplier terms are balanced.

 

If your average payable is 24 days and your average receivable is 47 days, that's 23 days that you have to float, which means you have to go out and get working capital

 

3. Enforce Payment Discipline

 

In order to shorten your receivables period, you'll need to have a good collection system in place. You should ask yourself:

*How long is it taking to get paid?
*What is your collections activity?
*Are you getting the right level of contact with your customers?
*Are you identifying disputes fast enough?
*When you identify disputes, what is your policy for getting them resolved?

 

Enforcing payment discipline should also be part of your payables operations.

 

 

4. Segment Your Customers, Suppliers and Inventory

 

When looking at your inventory, you want to observe the volatility of sales. Do you have too much cash tied up in products that sell only sporadically? Would that money be better off used in your "bread and butter" items that turnover more quickly? "You might end up having tons of money tied up in inventory without actually meeting your customers' needs. 

 

When breaking down your suppliers, you want to separate them into your regular suppliers versus your one-off buys. With your strategic suppliers, you'll have a better chance of negotiating better terms and discounts.

 

Perhaps most importantly, you should take a close look at your customers. Who really is a "key customer?" Just because your sales department thinks they're important – i.e. they generate a lot of revenue – that doesn't mean it's a profitable account. Norm Brodsky wrote last year about one business whose biggest account was actually a big money loser, ultimately adding to its cash flow woes. The solution isn't necessarily to cut that account, but to approach the customer with the situation.

 

 

5. Make it a Companywide Priority

 

If improving cash flow is a priority, make sure all of your employees understand that. Remember that your employees will be motivated by the targets you set for them. Obviously, collectors should have collection targets. But even your sales staff should be on board. If a salesperson only has a revenue goal, he or she will work to meet it, regardless of whether the invoices are paid on time or in full. Instead, institute a policy where, if something is written off, the revenue is backed out of commissions.

 

"If employees have a target, that's what they focus on," DeHaro says. "Make sure management teams support working capital objectives."

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FDs are burying cash flow problems

FDs are burying cash flow problems | Cash Flow Management | Scoop.it
Hiding or ignoring cash flow problems and acting like a bank to clients is a considerable risk even for growing and profitable companies...
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Big Working Capital Opportunity Seen in Europe

Big Working Capital Opportunity Seen in Europe | Cash Flow Management | Scoop.it

European companies could get almost €900 billion out of their balance sheets through better working capital management, research suggests. Crestway Consultants can guide your company and deliver results to the bottom line.  http://www.crestwayconsultants.co.uk/working-capital-improvement/

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5 Ways to Improve Cash Flow

5 Ways to Improve Cash Flow | Cash Flow Management | Scoop.it

If you’re looking for a quick fix for cash-flow problems, good luck. But if you’re serious about making strategic changes, read on.

 

SIMPLE FORMULA: collect your receivables as fast as possible and slow down your payables without jeopardizing your relationship with suppliers.

 

If you're just looking for a quick fix, you can extend your accounts payable period by using a credit card to pay suppliers. With a check, you only get a day or two of float – or the time between when someone deposits your check and when the amount is removed from your account. But if you pay with a credit card, your vendor gets paid and you don't have to pay the card down for several more weeks. Of course, you don't want to charge more than you can pay off in a month or you'll get slapped with some hefty interest charges.

 

That's a simple – and fairly short-sighted – solution. But if you're serious about improving cash flow, here are five tips.

 

1. Perform a Good Forecast

 

Quite often small and mid-sized businesses aren't prepared for all the costs associated with growing quickly. More sales could mean more employees and a bigger inventory.

 

2. Evaluate Your Terms

 

If you're having trouble with cash flow, check to see how well your customer terms and supplier terms are balanced.

 

If your average payable is 24 days and your average receivable is 47 days, that's 23 days that you have to float, which means you have to go out and get working capital

 

3. Enforce Payment Discipline

 

In order to shorten your receivables period, you'll need to have a good collection system in place. You should ask yourself:

*How long is it taking to get paid?
*What is your collections activity?
*Are you getting the right level of contact with your customers?
*Are you identifying disputes fast enough?
*When you identify disputes, what is your policy for getting them resolved?

 

Enforcing payment discipline should also be part of your payables operations.

 

 

4. Segment Your Customers, Suppliers and Inventory

 

When looking at your inventory, you want to observe the volatility of sales. Do you have too much cash tied up in products that sell only sporadically? Would that money be better off used in your "bread and butter" items that turnover more quickly? "You might end up having tons of money tied up in inventory without actually meeting your customers' needs. 

 

When breaking down your suppliers, you want to separate them into your regular suppliers versus your one-off buys. With your strategic suppliers, you'll have a better chance of negotiating better terms and discounts.

 

Perhaps most importantly, you should take a close look at your customers. Who really is a "key customer?" Just because your sales department thinks they're important – i.e. they generate a lot of revenue – that doesn't mean it's a profitable account. Norm Brodsky wrote last year about one business whose biggest account was actually a big money loser, ultimately adding to its cash flow woes. The solution isn't necessarily to cut that account, but to approach the customer with the situation.

 

 

5. Make it a Companywide Priority

 

If improving cash flow is a priority, make sure all of your employees understand that. Remember that your employees will be motivated by the targets you set for them. Obviously, collectors should have collection targets. But even your sales staff should be on board. If a salesperson only has a revenue goal, he or she will work to meet it, regardless of whether the invoices are paid on time or in full. Instead, institute a policy where, if something is written off, the revenue is backed out of commissions.

 

"If employees have a target, that's what they focus on," DeHaro says. "Make sure management teams support working capital objectives."

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Red tape and accessing credit prevents firms from exporting

Red tape and accessing credit prevents firms from exporting | Cash Flow Management | Scoop.it
The findings of a survey released today (Tuesday) by the British Chambers of Commerce (BCC) show that existing regulations and problems around accessing credit are hindering export growth in the UK.
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Companies risk harm from cash glut - survey | Reuters

LONDON (Reuters) - Elite companies in Europe and the United States are hoarding $1.2 trillion of cash on their balance sheets, potentially missing opportunities to cut debt, reward faithful investors or...
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Free cash flow issues could puncture Goodyear - The Deal Pipeline(SAMPLE CONTENT: NEED AN ID?)

Free cash flow issues could puncture Goodyear - The Deal Pipeline(SAMPLE CONTENT: NEED AN ID?) | Cash Flow Management | Scoop.it

Just to show that cashflow issues can affect all businesses. Crestway can help you with your cashflow issues - to get your free cashflow healthcheck fill in the form on our website www.crestwayconsultants.co.uk

Despite a springtime debt restructuring, the tire maker is worrying followers as it continues to burn cash while spending heavily on expansion in China and Latin America.

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Trade and transport most hit by insolvency

Trade and transport most hit by insolvency | Cash Flow Management | Scoop.it
In the first four months this year, over 5620 companies were declared insolvent at a national level, according to the data of the National Office of the Trade Registry (ONRC). This year, CITR expects a rise in insolvency among ...
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Good cash flow management is essential for the success of a rural business - Farming UK

Good cash flow management is essential for the success of a rural business - Farming UK | Cash Flow Management | Scoop.it
Good cash flow management is essential for the success of a rural businessFarming UK“The most common cause of financial problems that are seen in smaller businesses, many of which are diversified from the core estate or farm business, is one of...
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CTV News | Six money-management mistakes and how to fix them

Here are six common cash-flow errors and how to avoid or fix them, according to experts:
Read more: http://www.ctv.ca/generic/generated/static/business/article2426714.html#ixzz1wj6e9uSS

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Prompt Payment Code

Prompt Payment Code | Cash Flow Management | Scoop.it

Latest research shows that British SMEs are having to wait an average of 41 days longer than their original agreed payment terms before invoices are paid.  Join the prompt payment code http://www.promptpaymentcode.org.uk/

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UK businesses tighten cashflow controls

UK businesses tighten cashflow controls | Cash Flow Management | Scoop.it
UK businesses are tightening up their cash and credit control procedures in a bid to prevent late payments which damage their cashflow, according to experts at Clydesdale & Yorkshire Banks.
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Staying in business: Cash flow contagion cure for SMEs

Staying in business: Cash flow contagion cure for SMEs | Cash Flow Management | Scoop.it
Staying in business: Cash flow contagion and the impact on UK SMEs.
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Midsize Businesses Concerned about Cash Flow

Midsize Businesses Concerned about Cash Flow | Cash Flow Management | Scoop.it

Cash flow has become a critical factor in midsize companies plans for growth, according to a new survey. Get your free cashflow healthcheck from http://www.crestwayconsultants.co.uk/

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Cash (Flow) Really Is King

One of the most important lessons entrepreneurs have to learn, often painfully, is that cash really is king. I'm not talking about paper money -- I'm talking about cash flow.
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CannyPlanning's comment, May 19, 2013 6:08 AM
Maybe one of the best tools to practice the cash flow management is online cash flow forecasting software cplanningsoftware.com. Try it out and find yourself!
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Over 95% of east midlands businesses are underinsured Insurance Age

Over 95% of east midlands businesses are underinsured Insurance Age | Cash Flow Management | Scoop.it

Over 95% of East Midlands businesses are underinsured. 

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Business News: Crackdown on late credit payments

Business News: Crackdown on late credit payments | Cash Flow Management | Scoop.it
LOCAL businesses are tightening their cash and credit control procedures in a bid to prevent late payments damaging their cashflow, say Coventry experts.
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Managing your cashflow is a vital task for any startup wanting success

Managing your cashflow is a vital task for any startup wanting success | Cash Flow Management | Scoop.it
Launching a startup in the recession seemed like a crazy idea, but TwentyRecruitment has managed to make it work.
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SMEs Spend 3 Weeks a Year Chasing Payment

SMEs Spend 3 Weeks a Year Chasing Payment | Cash Flow Management | Scoop.it
Research has found that UK SMEs spend 3 weeks every year chasing up payments...
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Debt crisis: Spain 'to request aid for banks this weekend' - Telegraph.co.uk

Debt crisis: Spain 'to request aid for banks this weekend' - Telegraph.co.uk | Cash Flow Management | Scoop.it
Telegraph.co.ukDebt crisis: Spain 'to request aid for banks this weekend'Telegraph.co.ukThe news comes after a serious mishandling of the debt crisis by European leaders led Fitch to axe Spain's credit rating by three notches and issue a warnings ...
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A Guide on Cash Flow Management

A Guide on Cash Flow Management | Cash Flow Management | Scoop.it

If your business is low on cash—all the time, you need to learn how to better manage your cash flow. It’s not impossible or hard, but often you may have to use some unfamiliar tools and make some decisions on what expenses to cut. This excellent article, containing links to many resources, is almost a definitive tutorial on cash flow management. Well worth any businesses owner's time to explore and look for ways to improve their cash flow management.


Via Daniel Watson
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Queen’s Jubilee could cause serious cashflow problems for UK businesses

The Queen’s Diamond Jubilee could cause serious cashflow problems for UK businesses, according to RBS Invoice Finance, one of the UK’s largest providers of invoice finance solutions.
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Managing cash flow in turbulent times : News, Small Business News : BusinessWings.co.uk

Managing cash flow in turbulent times : News, Small Business News : BusinessWings.co.uk | Cash Flow Management | Scoop.it
With the UK economy officially back in recession, staying on top of cash flow is essential to growth.
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Why business and government must act to combat the UK's late-payment culture

Why business and government must act to combat the UK's late-payment culture | Cash Flow Management | Scoop.it
Blog - Why business and government act to combat the UK's late-payment culture...
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