Nov 27 2008
CASHFLOW MANAGEMENT – Hot topic for businesses at the moment
One of the most challenging issues facing business is cashflow management. Having run a small business for nearly 3 years now, we’ve certainly learnt some lessons. Some of the systems which we’ve implemented have reduced internal inefficients, cross purposes and miscommunication, allowing time to be a more strategically focused company.
Being able to measure the amount of money your company makes and spends during a given period can be used used as a barometer of your company’s health and worth. Understanding your cash flow lets you evaluate:
- Borrowing needs
- The timing of new hires and major purchases
- The timing of payables
Assessing Incoming Cash Flow Processes
- Your company is not a bank. It’s always a good idea to get the payment terms out on the table at the beginning of the business relationship. This allows you to get on with business of delivering the exceptional service or product, knowing the cash is flowing in.
- Staying on Top of Receivables. Don’t wait to invoice, not even a day. Any extra time to send the invoice stalls the money coming in as well as widening the cashflow gap.
- Accept credit cards. “Can I put that on credit card?” should be a common question within the business, you receive the money within 2 days. Setting up an internet merchant facility is very straight forward these days, there are a variety of different services the banks can offer for all amounts of revenue. DIY alternatives are Paypal.
- Cashflow forecasting. A simple spreadsheet which records actual receivables against a forecast can show a 3 month projection if your business is on track, or you need to notify a provider that an invoice may be paid later than usual.
Assessing Outgoing Cash Flow Processes
- Bill Paying Arrangements. If you have set payment terms, you can ask the vendors if they would consider different arrangements. For example setting up a quarterly payment schedule versus a monthly payment schedule could work better with cash inflows, or having a few extra days will help smooth out cashflow.
- Make the most of your employees. Throwing new people at a problem may not be the best solution. One of the biggest expenses is the company payroll, can additional responsibility be added to current staff? If tasks can be separated and assigned to different people that is great. Think processes, not people.
- Consider outsourcing when processes are in place. At an early stage of a business there are a lot of processes which need to be established prior to outsourcing. However any part of the business which isn’t a core part of your business like, bookkeeping, marketing, copywriting, testing, administration can all be serviced by outsourcing providers.
