* indicates required information
In a world where finance is harder to come by, here's some tips to help ensure your business doesn't run out of cash:
This is not only important, but can be good fun too. Perhaps it is a specific amount of cash you'd like to reach, or x months of overheads in the bank?
Remember, money in your bank is a lag indicator (an indicator of events that have already taken place). A leading indicator will give you an idea of what is going to happen in the future,
A good example of a leading indicator is the value of your sales pipeline. Predicting this can be difficult, especially if you are dealing with over-optimistic salespeople, but it will help you see potential trouble ahead early.
For Wow's FREE Sales Pipeline Calculator, e-mail email@example.com
Calculate your monthly burn rate - the rate at which the business consumes cash.
Identify the timing of major cash outflows within the business i.e. Quarterly VAT bills, installment arrangements, annual HMRC payments, payment plans to major suppliers, etc.
Use accounting software that has an automatic bank feed, like Xero. This will help you stay on top of things, as you'll only have one place to look.
Have a written credit control policy..... and stick to it. If someone hasn't paid you after a certain number of days, take action. Debtors are like unruly children - you either provide boundaries and stick to them.... or expect chaos!
Make your terms clear from the outset - include them in any proposals that you write, so that the client is clear what they need to pay (and when they need to pay it).
Consider reducing the payment terms on your invoices to '7 days' or 'by return'. Banks are the ones who should be giving credit at the moment, not small businesses.
Ask for deposits before you start work.
Don't complete the work/deliver the goods until you've been paid (keep something as leverage).
Pre-chase key invoices and build relationships with the purchase ledger departments.
Take action with bad debts. Negotiate finance terms if you know the customer cannot pay your full debt in one payment. Break it down for them.
Increase payment options. Encourage customers to pay by online banking, standing order, credit card or PayPal. And don't rule out Direct Debits - using these just got a lot easier, thanks to GoCardless.
Monitor the credit-worthiness of your customers (and key suppliers) - check out CreditSafe
Preserve cash by maximising credit terms from suppliers. If you don't ask, you won't get!
See if you can negotiate monthly payments on larger bills. Speak to your suppliers to see if they'd accept 3 monthly payments by standing order.
Don't be afraid to negotiate with HMRC too. If you speak to them BEFORE your tax bill is due, you have a chance of spreading the payments, with minimum interest to pay.
If you hold stock, make sure you are not holding too much of it. If you don't have a stock control system, consider something like Unleashed.
Well, sit back, relax and have a read of the latest gossip at Wow on our blog