Many SMEs (small and medium sized businesses) run out of cash whilst still profitable because they are unable to meet financial obligations when they become due, so profitability should not be the sole aim of a business. Remember the mantra:
Turnover is vanity, profit is sanity, cash flow is reality.
Trading whilst potentially insolvent soaks up a lot of management time and also carries a significant personal risk to the directors, hence every effort should be put in place to ensure there is sufficient liquid cash within the business. Cashflow management is more effective with the use of cash planning tools such as a cash flow forecast and a comparative analysis.
Here are some tips to help you improve cashflow:
• Use reliable financial data to track and trend as this information creates a solid foundation for improving the process.
• Bill early, accurately and in stages, as soon as work is done.
• Tighten your credit management process with scheduled phone calls, prompt follow up and chasing letters
• Encourage your clients to pay by direct debit or standing order.
• Avoid or defer non essential costs
FREE FINANCIAL HEALTHCHECK
Can you foresee a situation where you lack sufficient cash to pay your bills and staff? Do you have customers that are late on payments, making you short on cash but still profitable? A cash flow analysis is an essential tool for every business owner; it can be the difference between staying afloat and losing the business. However, it’s a skill many management teams and business owners struggle with.
We offer a 3-minute healthcheck which will give you a quick indication of the financial health of your business. It will alert you to situations that need to be addressed, giving you a better idea of where your money is, and how to stay in control.
click on the link below (or copy into your browser) to access our cashflow healthcheck:
If you would like to speak to one of our experts please see contact details below:
☎ 07340 954312
David.dunn @efm - network. c o m