Top Tips: Cash flow management

Cash is king, turnover is vanity, and profit is sanity. I’m not quite sure who uttered those words but like all old sayings there is always an element of truth in them.

So many businesses need and require cash flow but do so little about it. Here are seven tips that may help to focus your business on making sure that it stays afloat in this most austere of times.

1. Ensure you have good contracts and the appropriate terms of business in place.It is hard to enforce an agreement without a solid & binding contract and if there is a dispute. The devil is in the detail and the detail is always in the contract.

2. Agree payment terms from the outset – if you have two different payment dates then adopt one set of payment dates or create a new one that satisfies both parties. This can be difficult with very large firms who tend to want to enforce their terms on a smaller company.

3. Agree credit levels in advance – If you are going to give extended credit ensure that you receive something in return – If someone wants 90 days, get a percentage upfront if you can. This will offset the pain of waiting.

4. SAY NO WAY TO 90 DAYS – It is a simple mantra. Anyone who owes you money after 90 days without prior negotiation needs to be chased as they are either in trouble, or have no intention of paying you. It is not nice but sadly a factor of doing business.

5. Invoice discounting & Factoring are only for short terms use – Do not use either of these on a long term basis. They are addictive and can be helpful in short bursts but any long –term exposure can make you delusional as to the actual success and/or value of your business.

6. Do you have a credit control process? If Not – Get one quick. There is nothing worse than a group of individuals in an office running around trying to ascertain how to deal with a debt that has suddenly gone toxic. And don’t fool yourself into thinking you will never get a bad debt; if you haven’t had one then I can guarantee your luck is about to run out.

7. Don’t be afraid to escalate matters to the debt recovery stage where payment is not forthcoming. It may appear counter-productive but it actually proves the following:-
i) you have a process in place
ii) you are serious
iii) You are professional