The Downturn – 12 Cash Flow Tips
8th February 2009
1. Have you got your terms clearly stated on the bottom of your invoice? Beware of your terminology – if you ask for ‘net monthly' it is due on the last day of the month after which the invoice is dated. If you ask for ‘net 30 days' then it is due 30 days after the invoice is received. We actually print the words ‘payment due within 30 calendar days i.e. x date'
2. Try to negotiate earlier payment by a discount on the next order. Beware of offering discounts on current invoices, because they are often taken without paying early.
3. Can you negotiate longer payment terms with your suppliers?
4. If you really are struggling and hold stock, consider selling on your invoices to a specialist ‘Invoice Finance' company – it will cost (up to 10%), but you will get your money straight away. You can also take out Bad Debt Protection with these companies.
5. Have you a lot of assets but need cash for stock? Consider ‘Asset Finance' rather than using your cash reserves. The finance is secured against the asset itself e.g. machinery, and does not affect security that you need for bank borrowing.
6. Are you quiet with time to spare? If so start to shop around for cheaper deals on ALL your outgoings. You could also ‘spring clean' – you would be amazed at what you may have stashed away from stock to stationary which you could use, and things you can sell on e-bay.
7. Worried about the need to make staff redundant? Speak to an employment law specialist (negotiate a fixed one hour free interview up front!). You could ‘lay staff off'; ‘temporarily reduce benefits' and other options instead.
8. Set up a loyalty scheme for those customers who are using you through lean times rather than discount e.g. free servicing/wrapping/installation/maintenance, three for two, Saturday opening etc
9. Got staff that are critical to your business? Take out ‘key man insurance' to protect from death or illness. Work hard at keeping these people motivated, so they do not go and work elsewhere.
10. VAT and Corporation Tax. Set up a separate bank account with direct debits in every month, so you are not caught unawares!
11. Develop a cash flow forecast spread sheet and use it! If you need an overdraft you can speak to the bank before hand and get the best deal.
12. Diversify – use this time to really look at the market for niches, innovative approaches and find new markets
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