Hi, my name is Adam Stewart, Debt Collection Expert and owner of ADC Legal Litigation Lawyers.
You may remember my blog, Boost your Cash flow by Collecting Debts Sooner: 5 Tips for Better Cash Flow.
To continue to help you to improve cash flow and lower your blood pressure (haha), I am giving you an additional five tips on how to improve cash flow.
Just a reminder: there is no quick fix to improve your business’s cash flow. I like to play the long game. Healthy cash flow is critical for any business. Cash flow means you can restock your inventory, pay creditors and employees, meet operational costs and finance growth. It also provides you with the flexibility to meet any unexpected costs or shortfalls.
So here are 5 more ways to improve your cash flow:
- Analyse your cash flow.
Once you have a good accounts system in place, start evaluating the figures. Look at cyclical highs and lows so you can prepare for them in advance. Understanding your business’s cycle means you can time your financial activity to benefit most from sales peaks. An example could be by applying for a loan, and offset dips, such as by ramping up your marketing activity.
I like to use Xero budget analysis, which includes a year-to-year comparison.
Sit down with your CFO or accountant and run through the reports together, so you have a better understanding of the current and future outlook for your cash reserves.
- Improve your sales strategy.
There are a number of ways you can optimise your sales to boost your cash flow. For instance, you can create advantageous payment terms to customers who repay credit within a certain period. You could also offer deals on your products or services to those who purchase them for a fixed, extended period.
Having a good sales strategy will benefit your customers by saving them money and it will benefit your business by providing regular income.
- Offer credit cautiously.
While credit can be an important part of the supply chain and boost sales for your business, it is crucial to be diligent in researching potential borrowers. Conduct company, director and credit checks. If you can, get references from other traders in your industry and always outline clear credit and repayment terms.
- Speed and ease of payments.
Shorten your receivables in order to boost your cash flow. Make sure you send out invoices as soon as they are due, offer discounts to customers who pay bills early and penalise those who pay late.
You can also reduce your payment terms to 30 days if necessary. Make it really easy for your customers to pay you by offering several ways for them to pay.
- Have an effective collection system.
First, establish your own collections system. I recommend reminder invoice follow ups sent through your accounting package or your credit team.
If your internal debt collection system has failed, outsource immediately to Debt Recoveries Australia – your debt collection professional. We are the experts in this field and the quicker you outsource the debts, the higher the success rate. It will also send a strong message to your customers that you are serious about payment.
Good luck with these tips and let me know if I can be of assistance.
ADC Legal- Litigation Lawyers is a legal practice specialising in commercial advice and litigation, debt recovery and insurance claims recovery disputes. We partner with Debt Recoveries Australia to be your “one stop shop” for debt recovery and litigation services. More information can be found at www.adclegal.com.au or call us at 1300 799 820.