When economic hard-times hit, one measure more than any other separates the business survivors from those that fall by the way – cash-flow.

In boom times, many business owners naturally turn their focus to measurements like sales and profit, but when things slow down it is cash-flow that is the key test of business health.

The good news is that there is plenty business owners can do to turn a cash-flow trickle into a flood.

Here are 10 best tips for boosting cash-flow.

Put together a good cash-flow forecast

A cash-flow forecast is a key diagnostic tool for the health of a business. Without one, getting your business’s cash-flow right is almost impossible.

Many businesses operating without a cash-flow forecast don’t even realise their margins are coming under pressure.

Small business owners in particular often shy away from putting together a forecast because they find it hard to gauge the affect different factors will have on cash-flow – events like the introduction of a new product line, marketing venture or extra staff member can have an uncertain impact.

Communicate from day one

Once you understand how cash moves through your business , you can start taking action to increase cash-flow.

In the current economic and credit climate, there is one key challenge most business owners are likely to face in bringing more cash in the door: getting customers to pay on time.

Constant communication as the crucial first step to improving debtor days.

Communication with clients has to start from day one, with new clients receiving a notice clearly setting out how long they have to pay bills – and the consequences if they don’t.

Check the credentials of new customers

New customers are great, but new customers that actually pay are even better. The problem is, it can be difficult to tell one from the other until it is too late

New customers are great, but new customers that actually pay are even better. The problem is, it can be difficult to tell one from the other until it is too late

Give your customers a reason to pay

Reminders and checks may get the debtors paying in good times, but when things are tight a little something more will often be necessary to bring in the cash.

A tool many cash-flow advisors believe is effective, if costly, is the discount for early payment.

If a discount doesn’t make financial sense, consider offering other benefits for prompt payment such as a higher level of post-purchase service or priority access to new stock.

You can also make paying your bills less painful for your clients by allowing them to pay in instalments, helping them smooth out their cash-flow and giving you some increased security.

Spend more time ensuring your big clients pay

Small businesses that rely heavily on dealing with a few, big clients, often find themselves in a bind when it comes to cash-flow – desperate to be paid, but petrified of losing a key customer.

Managing big clients requires a careful approach, with plenty of care and attention backed by a firm commitment to being paid.

Encourage staff to bring in the cash

Many businesses reward staff for boosting sales. During a downturn, cash-flow management is arguably more important, so why not give staff a real incentive to help make it happen?

This can mean introducing a performance-based component for accounts receivable staff, but often improving cash-flow requires an organisation-wide effort.

It can often be worthwhile to direct at least a portion of your sales team’s commission structure towards ensuring the customers they sell to actually pay.

Debtor finance can help in a tight spot

There are a range of finance options available to businesses that can provide an immediate boost to cash-flow – at a price.

Be disciplined

If sweet-talking, phone calls, or discounts don’t get your debtors to start paying, they need to know that you won’t be afraid to bring the in big guns.

If you can’t be disciplined, outsource to someone who can

Business owners are notoriously time poor. Many just can’t devote enough time to debtor management, or regret the sacrifice required to other parts of the business if they do.

For businesses that want to beef up their debtor management, but don’t want to build an in-house accounts receivable capacity, outsourcing can be an option.

The key test of whether outsourcing will work for a business is how it fits into the bottom line, with the cost of the service balanced against the prospect of improved payment rates and the convenience of somebody else managing your debts.

Don’t grow yourself out of business

Cash-flow management may become imperative during economic downtimes, but periods of rapid growth can present equally difficult cash-flow challenges.

We see as many businesses go broke through expanding as contracting, because they don’t understand how to balance growth with things like capital investment as their company grows.

Author Bio: Tony Gattari is a business keynote speaker and guest speaker. His passionate enthusiastic style makes him ideal as your next guest speaker, sales speaker, marketing speaker or keynote speaker. Achievers group provides marketing and sales training, consulting, marketing workshops and keynote speaking services. See http://www.achieversgroup.com.au for more.

Category: Business Management
Keywords: business, business advice, business consulting, business management