Improve your cash-flow with these three basic steps.
Reduce stock levels
If you supply goods to customers don’t invest too much of your cash in stock unless you are sure you can shift the stock in the very near future. Not only does holding stock drain your cash reserves but if the goods are not used there is a risk they may become damaged or obsolete. You may also have to pay to store stock, another expense you could do without. Try to develop a system where you only order stock when it’s needed or reduce the level of stock you hold to the minimum your business needs. Overstocking can be a serious drain on cash-flow.
Extend supplier credit
Hold onto your money for longer by negotiating better terms with your suppliers. The larger your business is the easier it is to negotiate better terms. Don’t pay a supplier in 14 days if you can agree on 30 or 60 days. If you’re unable to extend your credit terms try and negotiate prompt payment discounts. The idea is to keep your hard earned cash in your bank account for as long as possible.
Chase your debtors
Credit control is the most important part of looking after your money. If you have carried out a service or supplied goods then you are entitled to be paid. Make sure customers understand what your terms are and when payment is expected. If customers are late in paying make sure you chase in good time and don’t forget about the money owed to you. If possible make sure you ask for a deposit or better still get paid upfront.
As a small business you are entitled to charge late payment interest at 8% over the base rate. Although you may not decide to charge the interest in most situations, having the wording on your invoices is a great way to encourage people to pay on time.
Stephen Hill Partnership specialises in helping small businesses. Arrange a free consultation today. Download our App.