iC provide tips for protecting your cashflow.
15 Oct 09 - Accounting
iC provide a handy list of tips to help companies of any size manage and protect their cashflow.
- Review bonus and incentive schemes – to ensure you have a healthy cash flow review your current schemes e.g. for sales teams you may wish to alter bonus payments to when you receive payment rather than on creation of sale order
- Credit control – look, listen and learn... keep an eye on your clients’ situation, listen to feedback from your sales and support staff and take action accordingly. You may need to consider reducing credit limits and payment timescales or request payment on receipt. For enhanced information on your clients credit situation consider signing up to credit reports where you will be notified of any CCJ’s and their current credit rating
- See the whole picture – ensure you have clear visibility of what is owed out and is owed in so that you can manage cash accordingly
- Invoicing – ensure that you have an accurate system in place where you invoice clients as soon as possible and that all records e.g. correct address and invoice number are up to date so as not to delay payments
- Incentivise clients – consider offering early settlement discounts to customers which may provide you with a cash to gain interest on prior to paying the supplier
- Take control – too much stock can impact on cash flow, regularly monitor stock levels and negotiate shorter lead times with suppliers to reduce the amount of stock held at any one time
- Go electronic –many payments are made via cheques which typically have a 5 day turnaround time before being able to draw from, a speedier and easier method of receiving payments can be via BACS. For enhanced cash flow management encourage regular clients to pay via direct debit
- Strike a deal – typically in a recession it’s a buyers’ market so don’t be afraid to negotiate preferential rates with your suppliers – whether that be early settlement discounts or longer credit terms. Don’t forget to monitor al invoices ensuring that they are not pre-dated
- Take action –ensure you have a system in place for cash collection including a step by step plan which could entail an initial letter, followed up by a telephone call a final warning letter and court action. Alternatively you may wish to outsource this stress to a third party who may take a percentage of the invoice value to collect the cash