Improving your cash flow

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Last updated on December 1, 2014

Review your cash-flow management on a regular basis and always be on the lookout for practical ways to improve cash flow.

The following tips will help you evaluate your existing cash-management system and identify actions that should improve cash flow in your business.

  • Manage your banking relationship proactively.
  • Increase the proportion of cash sales.
  • Consider implementing a system of 'pay on invoice only', rather than sending out monthly statements.
  • Speed up your invoice process and collection practices.
  • Get paid for your credit sales more promptly through progress payments, payments with orders, deposits with orders and use of credit cards.
  • Establish an accounts-payable policy.
  • Review each step in your stock-management system.
  • Evaluate ways of getting your stock on better terms, such as:
    • consignment stock
    • extended-credit terms
    • forward-dated invoices for seasonal purchases
    • discounts for prompt payments
    • scheduling deliveries as late as possible.
  • Evaluate whether to take a discount or to offer a discount.
  • Avoid or minimise bad debts through an established credit-assessment procedure.
  • Carefully assess the true benefits of 'deals'.
  • Control the level of overtime worked, evaluate the use of part-time and casual staff rather than permanent staff, and negotiate payment to sales people based on results.
  • Consider using sub-contractors rather than buying your own equipment.
  • Consider buying used equipment.
  • Rearrange annual payments, such as insurance, to times of less financial pressure or pay smaller amounts more frequently.
  • Set aside cash each month to meet tax bills.
  • Don't keep idle balances in accounts that do not pay interest – ensure any short-term cash surpluses are invested wisely.
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