10 ways to strengthen your cashflow

Without knowing how cashflow works within your business, you could be ignoring what is a crucial part of running your company.

Our corporate partner Intuit QuickBooks are a leading accounting software provider, and they have given their top 10 tips on how you can improve your cashflow whilst growing your business.

1. Do an honest audit

Before you can attempt to improve cashflow, you need to understand where you are with your current cash status. Look at accounts payable (money your business owes to suppliers) and receivable (money your business is owed from sales), credit conditions and stock. At this stage it’s essential that you keep an eye for any imbalance between cash leaving and entering your business.

2. Invoice customers properly

Obvious, but crucial. Customers pay quicker if you invoice them as soon as you can. Try and stay on top of this; you’d be surprised how many businesses are behind with invoicing.

3. Make it simple for people to pay you

Bank transfers are universally preferred, but include cash, debit and credit card payments. Make sure each invoice has a due date.

4. Pay attention to payments

If you know when you’re likely to be paid, it makes it so much easier to manage payroll and accounts payable. Everyone who pays you will have their own patterns, so start learning them and you can anticipate when you might get paid.

5. Offer incentives for earlier payment

You’d be amazed how quickly payment happens if you take, say, 5% off your fee should they pay you before a certain date. You can now start predicting how cashflow operates in your business.

6. Create a credit policy – and stick to it!

Once you understand your cashflow, you might be in a position to extend credit to your most loyal customers, enabling you to invoice sooner and accurately predict payment dates.

7. Don’t forget your collections policy

Helping you to treat all customers fairly, you’ll be able to query overdue invoices sooner. The policy should become more formal the longer payments remain outstanding, and of course, debt collection agencies can help.

8. When do you owe money?

A simple rule of thumb is to pay invoices in the day they’re due. You’d think paying earlier would be better, but this can leave you low on cash at potentially crucial moments.

9. Extend your payment times

If you have a good relationship with your suppliers, it might be worth asking them if you can spread payments or extend due dates. It’s easier to do this if you have worked with them for a long time.

10. Manage your stock

Ensure you have a firm grasp on the daily sales and you know what your best sellers are, and plan accordingly.

Hopefully, these 10 tips have helped show you what you need to consider when attempting to effectively run cash flow in your small business.

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