Wise words from Richard Branson (a rather successful business man).
It really is true that cash is king when it comes to the financial management of your business. The delay between the time you receive money from your customers, and the time you need to pay your suppliers is often a problem…but it is not insurmountable!
The first step is cash flow management (encouraging timely payments in and managing payments out).
Next is cash flow forecasting. The most profitable business owners use monthly cash flow projections. This allows them to see trouble before it happens…and plan accordingly.
Improving cash coming in
Here are a few ideas to help you speed up cash collection:
- Issue invoices immediately – and follow up if payments are slow coming in
- Offer easy, fast ways for your customers to pay (Stripe, Paypal, Direct Debit)
- Consider offering incentives to early payers
- Ask customers to make deposit payments at the time orders are taken
- Require credit checks on all new non-cash customers
- Consider a subscription business model (see our recent blog)
Here are a few ideas to help you manage your expenses:
- Take full advantage of creditor payment terms. If a payment is due in 30 days, don’t pay it in 15 days (but don’t let things fall behind – this can spiral out of control)
- Negotiate payment terms that work for you and your supplier
- Ensure all of your outgoings are necessary – and regularly look at ways to reduce them.
- Don’t always focus on the lowest price when choosing suppliers. Sometimes more flexible payment terms can improve your cash flow more than a cheaper price
Cash flow forecasting is important for all businesses – start-up, SMEs or large enterprises alike. It enables growth and progression…and helps to see and avoid problems that may arise in the future; preventing disaster!
We use FUTRLI to prepare forecasts – which enable us to offer sensible and realistic advice on managing your cash.
Please click here to find out how we use FUTRLI to help you run a successful business!