Leo Thomas asked:




Cash flow is king in the world of the small business and unless you are particularly keen on using expensive forms of credit it is probably a good idea to adopt good working practices right from the start to keep cash flowing.

Be aware and forewarned. Only by keeping completely on top of your available cash situation will you be able to deal with any potential problems before they get out of hand. You will probably have included a cash flow forecast in your original business plan, don’t waste this, update it weekly and don’t ignore systems that can make this process easier; look at accounting software that incorporates a reporting tool as this will allow you to access the relevant figures at the touch of a button. It is however pointless having instant access to great information if you fail to respond to what it tells you. Look for looming cash flow issues and address them early. Market Effectively. One potential reason for poor cash flow could be stagnating sales. Go back to your original marketing plan and revise your strategy. If you don’t reach your customers, existing and new, things are likely to grind to a halt. Easy Payment. Once you have reached the customers and convinced them to order, make it as easy as possible for them to part with their cash. User-friendly systems like telephone and internet ordering are a must and if there is a way to pay accept it; card payments, direct debit, standing order. Make things as easy as possible for people to give your business what it is owed. Credit Control. When customers don’t pay you will need an efficient strategy in place to recover debts as quickly as possible if you don’t want to end-up in a cash flow crisis, but one of the best ways to avoid the situation of bad debtors is to run credit checks before extending credit to anyone. Supplier Management. Use suppliers with whom you’ve negotiated advantageous payment terms where possible and ensure prompt delivery, if every link in the cash flow chain is not working smoothly problems can and will arise. Production Efficiency. Even if your customers all pay on time and your supplier is happy to wait for payment for months, cash flow issues will surface if you don’t get paid at all because you haven’t delivered. Assess the quality of your product regularly and maintain stock quantities sufficiently.

So, king or not, cash flow is something that can easily be managed and certainly doesn’t have to be a worry. If you take care to put the right measures in place early there is no reason at all that your small business can’t have great cash flow.

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