As a SME business owner you know the importance of strong cash flow, it is crucial for your survival and future. It is the difference between being able to plan your growth or sleepless nights, worry and anxiety – and we all know where that will end up. If you are starting out or not ready to employ a full time Accountant or Financial Controller you need to consider what are the right options to manage your money coming in and going out of your company. One of the options is to enlist the services of an external book keeper who also provide cash flow management and collection services. Here are some tips to help you stay on top of your cash flow:
- Forecast your cash flow
You need to predict your financial ups and downs in advance. Start by making a list of ALL payments you need to make over the next month, quarter and annually, don’t forget all your overheads including salaries and wages, rent, motor, Direct Debits, credit card expenses and any on line services you signed up for. Make a list of all the money that should be coming in. Simply subtract the payables from the receivables and that will give you a good idea of how much cash you’ll have at any given time. You now have the basis of your Cash Flow forecast. Tip: You can either use an Excel spread sheet to manage the process or why not invest in software or an online solution to help manage the process – there are plenty of excellent Forecasting and Planning software products available for SME’s – it will be money well spent and less worries.
- Lower your expenses
Take a long hard look at all your expenses, and limit them to help improve cash flow. Of course, this is easier said than done. Look through your company’s budget and planned expenditure and see what can be slashed or reduced. Set budgets for all expenditures including events, marketing activity, promotions, plant & equipment, maintenance,, software etc for the year ahead and review it quarterly. If you find you are not on target in terms of sales then decide if the expense is justified and necessary and if it is not budgeted for then don’t spend it. You must be disciplined and firm regarding any expenditure or otherwise you will run out of cash. Review all your supplier contracts, consider on bundling certain services — like internet and phone — to reduce bills and save much-needed cash.
- Get paid on time
A sale is not a sale until the invoice is paid – PERIOD. When you sign up a new customer, discuss and agree with them what your credit terms are and put everything in writing. Rather than just saying “payable in 30 days”, be specific, include a date when payment is to be paid by: “due on 30th November”. Offer a discount for early payment as an incentive, having the cash in your bank instead of your customers is your priority. If there are any queries regarding your invoice resolve them immediately and stick to your original payment date. Have systems and processes in place to review all outstanding payments and the procedure which needs to happen to ensure the debt is collected on time.
You can always avail of Invoice Discounting to release funds earlier and many companies who are growing rapidly avail of this service as against getting tied up with Bank facilities and red tape.
If you want to hear more tips on Cash Flow management why not attend the GROW SME conference in the RDS next Wednesday (31st May 2017) – Celtic ID’s Peter Kerrigan will be speaking at the event and we will have a stand at the exhibition. Registration is free – simply click on the following link: http://growsme.ie/
At Celtic Invoice Discounting, we provide Transactional Based Invoice Discounting. Call us on 01-230 0866 for a confidential conversation.
Peter Kerrigan is Managing Director at Celtic Invoice Discounting. He is passionate about helping cash strapped Irish SME’s by releasing funds tied up in their invoices through Transactional Based Invoice Discounting providing an alternative funding option than the main stream banking institutions.