Poor business practice is often the cause of cash flow problems, resulting in loss of funding and potentially leading to liquidation, so consider how adopting sound practices for your company could help to avoid a crisis with cash flow.
Credit control
Offering credit to customers helps them to balance their own cash flow. However, if they experience difficulties, you may not be paid on time, or at all. Carrying out credit checks is crucial so you know that the customer is initially viable. Your credit control team should have a system in place which will follow up on overdue payments, giving you a greater chance of being paid before they close the company. Although offering credit to all customers may increase the company profits, the cash flow will ultimately suffer if a client goes into liquidation. Outsourcing finance can make it easier to deal with credit control.
Fulfilment of orders
Make sure that you can complete all orders, as missing delivery dates could result in nonpayment of an invoice. You may even find that a client wants some compensation as a result of late delivery. Quality is another aspect that could affect cash flow, with shoddy goods only leading to disputes.
Making it easier for customers
Offer as many ways to pay as possible, so that customers don’t have to struggle to pay you. Payment using a credit or debit card is often the chosen method, or the use of a payment service like PayPal. Make it easier to place orders too, including ordering by phone and using the internet. More options usually means swifter payment.
Strict accounting procedures
Adopt good accounting practices so that you spot any potential problems or risks immediately. Accounts that are up to date will help you to plan ahead, and you may even realise that accepting a large order could place a burden on your cash flow. Forecasts and budgets will help to avoid any risks with cash flow.
Overheads
Keeping costs of overheads as low as possible will help to produce a healthier cash flow. Cut any unnecessary costs where possible and outsource some functions so that you receive a professional service while being able to concentrate on other aspects of the company.
Cash flow problems can easily occur, so careful management is necessary. Take steps to keep your cash flow in shape before you experience risks. If you would like to discuss potential problems, contact us soon for an informal chat.