Top 10 tips for businesses to improve their cashflow

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Cashflow is a critical issue for businesses. Management need to be relentless in conserving and controlling cash. Here are some tips to consider for improving your cash flow:

1. Prepare a monthly budget for cash collections and have constant reviews of actual V budget. This budgets needs to be reviewed on a weekly basis.
2. Credit control limits need to be set on each account which automatically prevents further sales to be made to that account if it goes over its credit level.
3. Negotiate extra facilities or repayment moratorium from bank.
4. Cutting overheads – keep a close eye on unnecessary or discretionary costs.
5. Source a cheaper source of supply of raw materials.
6. Negotiate discounts with your suppliers.  
7. Prompt settling of bills should be encouraged by discounts.  Regular customers can be put on monthly standing orders or direct debits.
8. Consider asking for a deposit payment up front for large jobs or progress payments on jobs which will run on for a considerable period of time before being completed.
9. Consider the use of invoice discounting as oppose to loans or overdrafts. Full credit terms should be utilized.
10. Hire purchase agreements and leasing arrangements will prevent a business parting with valuable cash, especially when purchasing capital equipment.

Declan Moore is Audit Manager in OSK.

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