Strong financial management and controls are essential to delivering profitable growth. Too many SMEs flounder even though they are growing their sales because they do not pay enough attention to managing money. Poor management of cash flow is a common factor that leads companies to a position where they have to declare bankruptcy. There are so many things you can do to improve your cash flow.
10 tips for improving the management of money
- Review your terms of trade. Are you being too generous in the payment terms you give your customers? How about asking for deposits with the order and collecting payment on completion?
- Conduct regular 60+ day outstanding debt reviews. Identify the top 3 causes of payment delays and fix the root problems.
- Put customers on stop who are overdue and have no valid reason for non-payment.
- Invoice in a timely fashion. Minimise the gap between job completion and invoicing.
- If you have a project that is delivered over several months use stage billing.
- Make credit collection a team game and not just the responsibility of the finance department. Operations sometimes needs to get involved to fix customer satisfaction issues.
- Renegotiate credit terms with your key suppliers.
- Have payment runs with your creditors once or twice a month.
- Review your slow moving stock on a regular basis and take action to sell it and convert into cash. Only buy stock for resale when you need it.
- The credit collection function should be performed by staff who are competent in this role. You need people who are persistent, good on the telephone and have good influencing skills.
From the tips above, choose 3 priorities. Go and implement. If you would like support on improving the management of money in your company, send us an email at firstname.lastname@example.org