How To Improve Cash Flow

If you are experiencing cash flow problems there are a myriad of things you can do to ease this problem. Below we will go through some simple to implement steps to help relieve this problem.

1. Invoice your customer quickly and accurately. Sounds obvious, but it is a common problem. Always get invoices out as soon as possible, but do not only invoice quickly, invoice accurately. If there are mistakes on your invoice, then the company you are invoicing is likely to query this and if so, this will slow down the process of getting the invoice paid.
2. You can use invoice factoring services. The factoring company will pay you anywhere between 85% – 100% of the value of the invoice upfront and when the invoice is paid you get the rest minus the invoice factoring companies fee. The fee can be between 0.15% and 3%.
3. Reducing the amount of stock you hold or trimming your inventory as it is often referred to is another affective way of improving cash flow. You may need to keep a certain amount of stock, but be honest with yourself, do you need all the stock you have. Often by carrying fewer lines you can decrease the stock you      hold and will therefore have more money in the business.
4. Make sure you chase your debts affectively. If you have clients or customers who are paying you well over the agreed payment date make sure you chase them. Do not let this slide or feel you cannot chase them frequently for the payment. Be polite about it, but contact them frequently until the debt is paid. He who shouts loudest will often get paid quickest.
5. If you can avoid clients who habitually pay late then this will also help. You don’t want to turn away business, but a client who always pays really late might be more trouble than they are worth.
6. Certain assets can be sold and then you can lease them back. If you do this you need to make sure you get a good price for the asset. By this I mean the going rate for the value of the equipment. Also for tax reasons you need to be aware of if this sale caused a profit or loss to the business.
7. Create incentives for paying an invoice fast. For example, if an invoice is paid within 10 days then give the client a discount of 1% – 2%. This will encourage some businesses that can pay, to pay early as it will be an easy way for them to lower      costs.
8. Accept credit cards and debit cards. By accepting credit cards for your services or products you will encourage people to pay quicker. You may be in an industry that does not typically accept credit cards, but there is nothing wrong with doing this and many clients may even prefer it. It will cost you around 2% for credit cards and about 50p for debit cards, but it may be worth it to collect the money much more quickly.
9. If you pay some or all of your suppliers upfront, try to arrange credit terms with them. This will give you time to sell the product or provide the service and collect the money from your customers and in turn help cash flow.
10. Credit check new clients to make sure their credit rating is sound. By doing this you can eliminate customers who have a poor credit rating and have a reputation for late payment or non payment of invoices.