Ten Top Tips to sort out your cashflow in 2013
By Jonny Martin Friday, 08 February 2013
January and February can be really quiet months for business (unless you are dietician or a personal trainer). So here are ten ways to sharpen up your cash flow and make sure the till keeps ringing…
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Be clear on your terms of trade…
What are they?
Terms of trade define your responsibility and crucially set out your payment terms – if you haven’t got terms of trade, see what kind of things other companies/competitors include.
Document, document, document
More cash is lost by not documenting deals than you can imagine. Charming wealthy customers have often become charming and wealthy by taking advantage of smaller businesses. If you end up in court – they can afford a top lawyer and you will be toast.
Get a purchase order number
This is a great game big companies play – you do the work and ask for the PO number and then you get the runaround ‘we are waiting for accounts…’ and you can’t invoice without one, because their terms of trade say ‘every invoice must include a PO number…’
Sending out Invoices….
Get all the details right
Make sure you put all the details on the invoice from the contact name, purchase order number and the correct postal address. Call to check it has arrived and that all is in order. If you wait 30 days before checking and they ‘ask for a copy’ your 30 days will start from then.
Invoice customers promptly
Sounds obvious – but every day of delay is a day less cash flow. And do use a proper accounting package such as QuickBooks for speed and to make it easier to chase money. With some online accounting systems you can invoice from your smart phone, you don’t even have to wait till you get back to the office.
Know how much you are owed
The advantage of using accounting software is that at a push of a button you can get a thorough company snapshot giving you a wealth of information about your businesses finances. This can be tailored to show the most useful information at any given time, including how much money you are owed and from where. This report should be item No. 1 at your weekly management meeting.
Always chase up late payments in a timely manner
Be professional but firm – it’s a business issue, it’s not personal and looking at it this way can make talking about money a bit less embarrassing. Generally he who shouts loudest gets paid first. And document every request for payment.
Watch what you owe….
Cash flow forecast
It’s essential to have a cash flow forecast going out at least six to nine months minimum to see potential shortfalls. Stress test this with sensitivities – e.g. what if sales drop 10%, so you can anticipate and prepare for the worst. And remember you will also need more funding if sales are growing fast.
Extend your payment terms
Don’t try and save cash by not paying suppliers on time – this is a short term solution that will come back and bite you. Rather, go and see them and make a deal for revised payment terms. Who knows, they might like what you do and ask to invest?
Boost profitability…yesterdays profit is today’s cash
Check your prices
Most small businesses don’t charge enough – fact.
Raise them if needs be
Look at what you can add to your product to support a price rise or what can you take out to boost the margin.
Jonny Martin is a financial fitness coach for accounting software firm Intuit