I have listed 10 ways to improve your cash flow, all of which can be easily actioned. Some will be obvious to you, some you may not have considered. It makes no difference as such information bears repeating.
1. Chase overdue invoices – Don’t drift, chase the day after they are due. Don’t be afraid to ask for payment, it’s your money after all. You’ve kept to your side of the agreement. It’s now their turn to stick to theirs.
2. Invoice accurately – Apparent errors on the invoice provides one of the most common excuses for paying bills late. So take away the temptation and get your invoicing right first time.
3. Send out invoices promptly – It is important to send out the right signals to your customers. If you’re sloppy with sending out invoices then you’ll be sloppy at chasing the money.
4. Early payment incentives – Consider offering cash on delivery discounts or prompt payment discounts.
5. Appoint dedicated credit controller – Chasing money is a full on task and needs the focus of a single specifically appointed individual. Passing the task around leaves a chance for responsibility to slip through the net.
6. Use debt collectors – But only at the point when you feel that you’re being given the cold shoulder by your customer. If payment is over thirty days late, it’s unlikely to come at all without some form of positive intervention. If you have exhausted your main credit control procedure then the account in question should become an ex-customer. Bring on the debt collectors.
7. Factoring – One of the most dramatic ways to improve your cash flow is to ‘sell’ your debtors list to a factoring company who will in turn pay you up to 85% of the total outstanding amount straight away. They will, of course, charge interest until the debt is collected along with a commission for their trouble. Nonetheless this is still an option, particularly when in rapid growth.
8. Upsell to top 20% of customers – It costs little extra to sell your top 20% of customers additional goods or services. Sometimes you just forget to ask.
9. Increase prices – Contra to conventional wisdom, it is possible to raise your prices with little fallout. It is worth setting the scene for this rise by reminding your customers of the real added value that your products bring them.
10. Change payment terms – Test the effect of this on new customers by reducing payment terms from say, 30 days to 15 days. Yo may be pleasantly surprised by the lack of reaction. Reducing your debtor days by just a few can improve your cash flow significantly.
Decide which methods can best improve your cash flow and dig in without delay. Time is money after all.
Tags: Cash flow
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