Cash is vital to the ability of a business to survive and prosper. Careful monitoring and management of cash coming in and cash going out is required. Experts recommend you should have sufficient cash in reserve to be able to pay normal operating costs for at least 3 months. This may seem like a big ask but some tips than can assist you to turn this into a reality for your business are:
- Issue invoices promptly & regularly chase outstanding payments
- Reduce terms of payment. If your payment terms are 30 days change them to 14 days
- Consider offering a discount for prompt payment
- Define a credit policy which includes setting of credit limits and credit checks
- Asked suppliers for extended credit terms
- Reduce stock levels
Write a cash forecast. This will enable you to predict the floods and droughts of cash. (Why is it there always seems to be a drought at precisely the time you need to pay the Bas?) Always make sure any excess cash is transferred to a high interest online saver account until it is need