As the recession becomes ever more real, how to improve cash flow progressively dominates our business thoughts. Small Business Voodoo is playing its part by providing you with even more ways to improve cash flow for your small business.
OK, let’s go.
21. Cut overheads – Recheck all overhead costs with a fine tooth comb. There is always something that can be stripped out of costs.
22. Combat seasonality by diversifying – Diageo, owners of the great British summer drink Pimm’s, launched Winter Pimm’s to address seasonality. Breweries produce lagers and light ales for the summer, stouts and porters for the winter. Walls ice creams were joined by Walls sausages. Greetings card makers celebrate all year round. Christmas Day, Birthdays, Mother’s day, Father’s Day, Auntie Edna’s Day. Small business can always develop off season related products to smooth out the revenue curve, improve cash flow and keep the business clockwork well oiled all year round.
23. Renegotiate rent – Helpful if you have a healthy working relationship with your landlord. Even more helpful if you are coming toward the end of a lease period and haven’t yet renewed. Test to see how much slack there may be in your rental agreement. Nothing ventured, nothing gained.
24. Downsize property – Often not feasible for small business but nonetheless should be considered.
25. Re-evaluate insurance policies – Insurance policies can be a drain on a small business startup and difficult to know how far to take. I remember when my kids wanted their first (and last) rabbit. I asked the pet shop owner how big the rabbit hutch should be. He replied, loud enough for the kids to hear, “As big as you can afford sir”. Emotional blackmail I pondered as I ordered the Pantechnicon to deliver the rabbit’s three storey end terrace to our place.
Insurance works the same. Employee liability is easy – that’s statutory. But loss of profit, loss in transit, keyman insurance….where do you stop? Voodoo’s Second Law of Small Business states that whichever insurance option you decline, that will be the one that you should have kept. To improve cash flow in hard times you need to make hard decisions.
26. Convert annual overhead expenses to monthly direct debit – Typical examples; insurance, vehicle hire purchase payments, membership subscriptions, photocopier rentals and so on.
27. Cut staff overtime – Overtime can easily become a habit, especially for employees. Now might be a good time to break that habit. You can further improve cash flow by considering some sort of flexitime where even normal working hours can be accrued for busier times.
28. Avoid overtrading – Slow down on chasing the volume and gently contract your business around your top customers.
29. Hold cost cutting brainstorm with staff – Your staff are a great source of ideas and knowledge. Such a conversation also serves to put everyone in a cost conscious frame of mind.
30. Update your cashflow forecast – As always, robust planning can help avoid costly bank charges and interest payments.
Bonus Cash Flow Tip: In response to Gordon Brown’s credit crunch announcement last week, HMRC have just posted about a new Business Payment Support Service which seems to offer some real cash flow support for small business struggling to pay tax, national insurance or VAT. It’s not often HMRC will be so proactive in helping you improve cash flow for your business….so fill your boots.
I’ll tell you what, I’m now really in the zone and can’t stop so here’s a few more cash flow tips;
32. Reign in control procedures – i.e. staff fraud, sloppy payment procedures, daily banking etc – Often overlooked but should be monitored, cash flow crisis or not.
33. Consider paying PAYE/NI using BACS (Bank Automated Clearing System) – This gains you an extra three days credit. Use the same BACS system to receive customer payments promptly.
34. Open interest bearing account – Small business can easily improve cash flow by transferring cash out of non-interest bearing current accounts. Millions of pounds of small businesses’ cash is left in accounts with no interest month after month. Make sure yours isn’t one of them.
35. Speak to HMRC about changing VAT quarter – This is real crisis management stuff and at best will only work once. You’ll need a good reason other than you’re short of cash.
36. Switch to paying VAT online – HMRC wil give you up to 10 extra days credit.
Phew. The point here is that if you dig deep, you can keep finding new ways to improve cash flow. Rather than wait until the crisis hits, make this a part of your standard small business routine and put yourself in a great position to manage the downturns.
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