Cashflow is confidence – the more you have, the better! Try the below strategies to help take control of your cashflow:
- Set your Terms of Trade.
Provide these to your customers at the outset of each job and ensure they sign them off. Terms should include when you expect to be paid, and your ability to add interest and/or debt collections costs onto any outstanding amount.
- Stick to your payment terms.
Don’t let your customers pay you late. Ensure they’re followed up as soon as the payment becomes overdue. If there’s no response, call them.
- Use a contracted debt collector on slow payers.
The cost of this will be added to the customer’s debt (provided this is set out in your Terms of Trade).
- Set aside cash for tax payments.
Put this in a separate bank account so you can cover tax payments as they fall due. We can help you work out how much you should be setting aside for your tax payments.
- Manage your work in progress.
Invoice regularly, reduce the number of jobs you have on at one time and set budgets for your team to stick to.
- Measure your inventory cycle.
Measure how long it takes on average to sell each item and reduce obsolete inventory. You’re better off converting slow moving or obsolete inventory back into cash to reinvest in faster selling inventory.
- Reduce your inventory on hand.
Only hold enough inventory to cover the time it takes between the sale of an item and when you can get delivery of the same item.
- Finance fixed assets.
Finance the purchase of fixed assets over terms similar to how long the asset will last before it needs to be replaced.
- Set a budget.
For both income and expenses each year, and then stick to it. If a new cost is not in your budget, find a saving somewhere else.
- Build a ‘war chest’ of cash.
This should be in a separate bank account and be enough to cover at least one month of expenses (ideally more).
Talk to us about strategies you can implement to get the cash flowing in your business.
“You must gain control over your money, or the lack of it will forever control you.” – Dave Ramsey