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News - Simple Ways to Manage Your Cash Flow

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Simple Ways to Manage Your Cash Flow

1st November 2016

In these tough and challenging economic times, all businesses are seeking ways to grow their sales, be it from acquiring new customers or gaining additional sales from existing ones.

However, whilst this is certainly a positive plan of action, unless it is done with an eye on the cash collected, the efforts can easily be wasted.

Chasing turnover alone is a well-known road to business failure!

Remember: sales are vanity – profit is sanity – but CASH is reality.

There are many ways of managing your cash flow, and here are 5 Tips that are simple and easy to put in place:

1. Cash is king!

“There are three reasons why we can’t do this.  The first is that we have no money. 

And the other two don’t much matter.”  (Fiorello LaGuardia)

Your businesses simply cannot operate without cash – it’s the ‘lifeblood of your business.’

So the absolute golden rule is to make sure you know at all times your exact cash/bank position.

2. Liquidity

The importance of liquidity cannot be underestimated.  Liquidity is a measure of the extent to which a person or organisation has the available cash to meet immediate and short-term business obligations. Ensure that your finance function can always provide you with an accurate position at any moment.

3. Debtors

Always know who owes you money and be firm in your trade terms.

Businesses must be able to collect cash from customers within the terms they set.

4. Resolve issues

Deal with queries from customers promptly. They won’t usually pay anything if there are any matters to be resolved on an invoice, no matter how trivial it may seem to you.

5. Drop late payers

Don’t be tempted to trade with businesses who repeatedly fail to meet their payment commitments. Alternately, you could increase your prices to them to compensate for the extended payment.

At the end of the day, a bad paying customer is probably not worth having – they eat into your cash flow.