Ten ways to... Improve your cashflow

Successful ventures are built upon healthy cashflow. This is where money entering the business is greater than money paid out. If you want to improve your cashflow, here are some simple measures to consider

  1. Take a good look at your costs. Finding ways to reduce your outgoings will quickly improve your cashflow. Identify areas where you are paying out unnecessarily. For example, you might be posting letters when emailing would be cheaper. Only buy things if there is a sound business reason for doing so.
  2. Eliminate waste and root out inefficiency. Deal with areas of your business where you aren't getting maximum value for money.
  3. Exercise better stock control. Of course you have to weigh up such things as discounts for bulk buying, but aim to keep just enough stock to service your customers' needs. To free up capital, sell off old or obsolete stock at a reduced price.
  4. Shop around for better deals than the ones you're getting from your current suppliers. Apply this to everything you buy or lease - from machinery and materials to utilities and professional service charges. However, before you change suppliers you need to be sure you'll receive the same quality (or better).
  5. Issue invoices promptly and charge interest on late payments. This will encourage all customers to pay their bills on time.
  6. Ask your customers for a deposit or part-payment up front to cover sums you will have to pay your suppliers. Having to pay these before you've been paid can put a considerable strain on your business.
  7. Offer early-payment incentives such as discounts to those who pay early. Don't offer too much (in fact, try to offer free products rather than money off). The trick is to offer just enough to make it worth the customer's while.
  8. Use the services of a debt factor. Factors will advance you up to 85 per cent of the value of each invoice before your customer pays and the remainder - less a charge - when full payment is received. Factors will also chase customers for payment.
  9. Consider putting your prices up. This will boost turnover straightaway, but you need to make sure it will not put some customers off. Knowledge of your market will help you decide whether a price increase is a good idea.
  10. Stop doing business with bad or slow payers. Instead of spending time and money chasing money from such customers, you could be finding new customers who pay their bills on time.