Top 10 tips for businesses to improve their cashflow
Cashflow is a critical issue for businesses. Management need to be relentless in conserving and controlling cash. Here are some tips to consider for improving your cash flow:
- Prepare a monthly budget for cash collections and have constant reviews of actual V budget. This budgets needs to be reviewed on a weekly basis.
- Credit control limits need to be set on each account which automatically prevents further sales to be made to that account if it goes over its credit level.
- Negotiate extra facilities or repayment moratorium from bank.
- Cutting overheads – keep a close eye on unnecessary or discretionary costs.
- Source a cheaper source of supply of raw materials.
- Negotiate discounts with your suppliers.
- Prompt settling of bills should be encouraged by discounts. Regular customers can be put on monthly standing orders or direct debits.
- Consider asking for a deposit payment up front for large jobs or progress payments on jobs which will run on for a considerable period of time before being completed.
- Consider the use of invoice discounting as oppose to loans or overdrafts. Full credit terms should be utilized.
- Hire purchase agreements and leasing arrangements will prevent a business parting with valuable cash, especially when purchasing capital equipment.
Declan Moore is Audit Manager in OSK.
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