12 ways of maximising your cash flow

The health of any business is a mixture of three factors, cash flow, revenue and costs. Many businesses are great at looking after turnover and profit, but take their eye off the ball and forget about cash flow. Many a company with a healthy order book and business model has gone bankrupt as a result of poor cash flow. Here are twelve ways of maximising your business’s cash flow.

1. Shorten your payment terms

Easy to say, less easy to apply in practice! If you change your payment terms to 14 days instead of the more normal 30 days, then you are likely to get paid in 30 days rather than 60 days. If you can negotiate it with your customers or clients, what about payment before dispatch of the goods, or payment on receipt of the goods?

2. Have rigorous systems and processes for credit control

Good credit control is not a mystery science. Good credit control requires discipline and someone systematically talking to late paying debtors. In addition, before you engage a new client or major customer, it is worth performing credit checks. I know of one small training company that went into liquidation after an outstanding debt of £50k was not paid. If there is a hint of poor credit worthiness ask for payment up front — or a large percentage of payment up front

3. Phone when sending an invoice

When you are sending an invoice to a client (or customer) give them a call to tell them they are expecting it. This gives you an excuse to speak to your clients, and may circumvent any problems with the invoice. It prompts your client to get your invoice sent to the accounts department, rather than letting it languish in their in-tray.

4. Send your invoice via e-mail (with a return receipt)

An invoice is less likely to get lost in the post if it is sent via e-mail. Make sure you put a read receipt on the invoice so you can track that it has been delivered and opened.

5. Offer a discount for prompt payment

Incentivising (or penalising for late payment) your customers for prompt payment, may help your customers/clients pay you quicker.

6. Put Bank details on your invoice

Ask your customers and clients to pay you via BACS — and encourage your clients to do this by putting your Bank account details on the invoice, and specifically stating you want payment via BACS.

7. Invoices paid via BACS are paid quicker than cheque.

BACS payments do not involve The Royal Mail or the three to five working days for a cheque to clear. You will probably get paid at least one week quicker if you get paid via BACS.

8. Issue invoices promptly

The quicker you ask for payment, the quicker you are likely to get paid. Not rocket science… Late invoices are more likely to be forgotten about — the sooner they are issued, the more likely they will get paid.

9. Do cash flow forecasts

Many businesses have gone bust by not managing their spending versus the amount of money they are receiving. A cash flow forecast, completed monthly, will give you a good guide to what you can afford to spend

10. Monitor credit worthiness of major debtors

Do keep an eye on your major debtors. If you sense that they are having problems or struggling, be pro-active and ask them how (and when) they intend paying your bill.

11. Maintain a dialogue with major clients

The more that you are talking generally with your clients/customers, the less likely they are to sit on one of your invoices. You will also get a sense of if they are running into problems…

12. Don’t have all your eggs in one basket

Even if you follow all of the advice in this article, there will be times when you are unlucky and one of your clients will go bust. By making sure that no one client is more than 25% of your turnover, you will minimise the risk to your own cash flow.

 

 

Heather Townsend is the Chief Coach at The Efficiency Coach, and Founding Elder of ‘the executive village’. The Efficiency Coach, an award-winning business, works with professional advisors and business owners to help them achieve better business results for less effort. The executive village brings together business owners to help them solve their business challenges.

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I help professionals, mostly accountants and lawyers become the Go-To-Expert. After joining BDO LLP in 2004, I have now almost clocked up ten years working predominantly with accountants helping them achieve their career and business goals. Unusually for someone with an Engineering Degree, I accidentally became a writer and used my knowledge on social media to write the current best-selling and award-winning book on networking, The FT Guide To Business Networking. (over 100 five star reviews on amazon) In 2012, the book I always wanted to write, 'How to make partner and still have a life' was published. In March 2014, my latest book, 'The Go-To-Expert: How to build your reputation, differentiate yourself from the competition and win business' was published. People frequently talk about me as someone who really knows her stuff – which may be the reason I have, over the last decade, worked with over 300 partners, coached and trained over 2000 professionals at every level of the UK’s most ambitious professional practices. 

I am honoured to have been asked to judge the British Accountancy Awards in 2011 and 2012. I am a member of the Accountant's Club Global Advisory Panel, and write regularly on practice management issues for CCH.

Myself, and Jon (my co-director) are approved Growth Accelerator Coaches. This means that we can if you are eligible, through the Growth Accelerator scheme, help you get some coaching funded by the scheme. Click here for more details to see whether you are eligible for the scheme.

Read how we have helped one of our accountancy clients access Growth Accelerator funding to grow their turnover by nearly 50% and profits by over 200%

The types of work I am currently helping my small professional practice clients with, includes:

1) Helping a £2m t/o practice grow to £4m by restructuring the firm and helping the management team step up 

2) Working with a £1m t/o practice to grow to £2m by generating more leads, and getting more work from existing clients

3) Enabling a £300k t/o practice grow to £1m by helping it sort out it's profitability by adding in efficient systems and processes, and increasing the quality of the  lead generation by marketing to a niche

4) Facilitating the growth of a one man band practice into a 3 person practice by helping increase the lead generation and conversion rate of leads, plus keeping the practice owner accountable to his goals.

The Excedia Group was founded by myself and Jon Baker to bring clarity, perspective and knowledge to help our clients achieve their business goals. We specialise in working with highly technical individuals, typically lawyers and accountants, helping them to get out of their comfort zone and build a profitable and sustainable client portfolio whilst handling the challenges of leading a business. 

My work splits into about 50% Executive & Business Coaching with Partners & potential partners, with the rest split between training, consultancy and writing.

My articles & quotes regularly appear in the press, e.g. FT, Guardian, Accountancy Age, Accounting Today, Economia, ACCA's publications. I regularly blog at Partnership Potentialventure-NowJoined up networking and How to make partner.

To book me for a speaking engagement please contact my PR Agency, Meerkat PR, on 020 8563 0182, and ask for David Stoch. For any other work related enquiries, please contact me directly.

My clients have included: Deloitte LLP, KPMG LLP, BDO LLP, Haines Watts, MSI Global Alliance, UK200 group, Macintyre Hudson LLP amongst others.