Increasing your Cashflow

26 11 2009

We all know the importance of maintaining a positive cashflow from month to month if we want to avoid a liquidity crisis, and all the misery that entails.

However, there is a lot more to cashflow management than just avoiding a crisis. Actively striving to increase your cashflow can –

  • Make it easier to plan and fund future growth and expansion
  • Reduce the amount of fixed capital you need at any one time
  • Give you the flexibility to move quickly and effectively in response to market changes

The key to successful cashflow management is to optimise the amount of cash available to you at any one time. This means increasing your cashflow as much as you can, without jeopardising other strategies. This means that you have to find a balance to suit you.

Credit

The first, and most important, step is to establish a system for tracking and controlling credit. The faster you receive a payment from your customers, the more cash you will have at your disposal; therefore, it is important to bill early, and chase up customers who have failed to pay.

However, it is also important that you don’t impose too strict a regime, otherwise you could drive away customers, and they won’t want to refer you! Therefore, you need to find the right balance to suit you and your situation.

Payments

You should always make the most of payment periods offered to you. These are in effect lines of interest-free credit. At the same time, you should also take advantage of any incentives your creditor offers you. For example, this could be a 2% discount if you pay early. If your cashflow will allow it, this is a useful option to have.

Prices

While it is important to keep your prices competitive, you also need to make sure you are increasing your prices to cover any increase in costs; or else your cashflow will suffer. Remember, most customers tend to expect an annual rise in prices, provided it is within an acceptable range.

Call the experts

This is an area in which we have a great wealth of experience. If you are struggling, or would just like a helping hand, please feel free to contact us to arrange a meeting, or visit our website, and discover how much we can help you.

Tax Accountant.

Make sure you’re aware of the new National Minimum Wage Rates for 2011 – they come into effect in October 2011.

Accountant in Brighton – Keepers Accountancy

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