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Update: The Australian and New Zealand operations of Bibby Financial Services were acquired by Scottish Pacific Business Finance in late 2015 to create Australia’s largest non-bank invoice finance specialist. Welcome to our website.

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5 Tips to Put the Flow into your Businesses Cash Flow

5 Tips to Put the Flow into your Businesses Cash Flow

As in nature where the sun is vital for life and growth, so cash flow is essential to the life and growth of your business. It is the oil that lubricates the cogs of industry. In a recent survey conducted for Small Business Week to identify major areas of stress for small business owners, it concluded that small business owners struggle to maintain adequate cash flow. In fact, of the small business owners polled, managing cash flow is the main stress producer (43%), coming in well ahead of the next stress producer at (29%).

Considering its significance to business, and to the emotional wellbeing of business owners we thought it would be timely to focus on how you can put the flow back into your cash flow with these 5 simple tips.

1.            Effective Cash Flow Forecasting

An inordinate amount of small businesses tackle the management of their business cycle without an effective form of cash flow forecasting in place. According to Paul LaRock a principal at consultancy Treasury Strategies, “too many companies get blindsided by unfavourable movements in cash flow that are predictable if they really sat down and thought about it.” By thinking about and planning for your cash flow movements you are in a much better space to deal with unfavourable movements, and indeed the day to day management of your business. In addition to this once the cash flow forecast has been agonised over and set, it is vital that ongoing monitoring of the forecast becomes part of the ‘DNA’ of the business, to ensure its continued health and growth.

2.            Debtor Management

We’ve all heard the expression the cheques in the mail! However, businesses need that cheque to be cleared funds in their bank account, where the cash can continue to support and grow the business. However, debtor management can be one of the most difficult and sensitive areas in effective cash flow management. Let’s face it not many of us like picking up the phone to politely but firmly inquire when last month’s invoice will be paid. So we tend to put it off with the result being your average debt turn blowing out!

That being said, make a plan and commitment to put the right procedures in place to chase up outstanding debts. For instance, as recently revealed by a business associate, it can be as simple as her recently retired mother in law hearing how long it was taking her to collect on her invoices. She started emailing and calling her debtors resulting in a massive improvement in the prompt payment of her debts! Failing that, you may want to consider engaging a company that offers debtor management services and who are experts in all things pertaining to debtor management.

3.            Flexible Working Capital Facilities

You want working capital facilities that provide you with breathing space to develop as your business grows. Discuss the facilities available with your bank or financier, and understand how they operate. This includes any facility limitations that may stifle your ability to gain access to cash at critical growth periods in your business. This may mean investigating other options outside of your traditional financing relationships including companies that specialise in cash flow lending, such as invoice funding.

4.            Supplier Payment Terms

It kinda seems hypocritical, but negotiating favourable payment terms from suppliers such as paying late or by instalments can be an effective way to ‘horde’ your cash. Other businesses may have the ability to offer these terms, and by asking you may be able to tap into a valuable cash flow advantage. However, negotiating terms of payment with your suppliers is a skill that needs to be honed and developed. It’s therefore a good idea to have a strategy before entering talks with your supplier and decide what are non-negotiable factors, such as payment dates etc.

5.            Stock Management

Make sure that there is enough cash available for the operation of, and investment into the business by not tying up cash in stock unnecessarily. While your hard earned cash is tied up in inventory it’s not able to work in other areas of your business, such as investment in sales or operational staff which could grow your top line revenue.

Following through on these simple yet timely tips will help put the flow back into your cash flow and keep the sun shining and your business healthy and growing. 

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