Top Tips for effective cash flow management

Know your customers

Have you considered running credit checks on your current and potential customers? Credit checks will help you determine if your customers have a good track record of paying their bills and also if they are credit worthy. When creating new customers within your accounting software set credit levels against your customers. This will produce an automatic flag that will show at the time of creating an invoice if the customer is over the credit limit set against them.

Be clear on your T’s & C’s

If you have set your businesses settlement terms at 7 days or 30 days be sure to communicate this with your customers so that both parties are clear on where they stand. Use your aged debtors report to identify any outstanding debt owed by your customer. Also monitor any recurring problems in getting paid on time.

Check your invoices

Before you send your invoices check that they have been created correctly. If you have been asked to include a purchase order number then be sure to have this on the invoice. Read over the invoice and ensure it shows the correct date, quantity, etc. Do not give your customers an excuse not to pay. Once the invoice has been created do not forget to post it or email it to the customer. Most accounting systems now give users the option to email invoices. Issue your invoices as soon as the job or sale has been completed. You may also wish to phone the customer once the invoice has been sent to ensure it has been received.

Stock Levels

Are you holding too much stock? Within your accounting system run reports on your products and ensure that you are not tying up cash by holding more stock than you need. Speak to your suppliers and investigate the possibility of more frequent deliveries.

Negotiate with your Suppliers

Have you shopped around to get the best deals with your suppliers? Do not be afraid to negotiate on longer credit terms, volume discounts. It is often the case if you don’t ask you won’t receive.

By applying these simple steps above businesses can manage their cash flow more successfully. With uncertainty in the economy continuing cash flow management has never been more crucial for businesses in ensuring they are equipped to survive.

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