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Checklist: How to improve cashflow

Steps you can take to increase your cash flow.

On this page

  • Marketing activities to improve cash flow
  • Dealing with your customers
  • Managing suppliers and stock for improved cash flow
  • Staff and cash flow

Marketing activities to improve cash flow

Ensure you know your target market and potential customers within that market - a more focused target market will result in less marketing expenditure and more clarity on those potential customers in that market which sales can be directed to.

Understanding what problems your product or services solves for your customer - the more you know about what the customer wants the higher likelihood that you can define and meet their need.

Regular marketing - is critical if you say a monthly newsletter, then it must be done monthly.

Measuring marketing results - do you know where your customers are coming from – that way you can refine your marketing spend to the most successful marketing tools you use.

A data base of your customers - if you know how to reach your customers and understand their buying habits, then you can develop marketing activities that will encourage them to come and buy again.

'Bundle' sales - provide offers that move stock more quickly – bundle products or services to increase sales value of each sale.

Answer every phone call - if you are too busy to answer your business phone, then you may be too busy to be in business.

Follow up on every enquiry - research suggests that 45% of all enquiries are converted into a sale – if you are not achieving this then you need to have processes in place to ensure you make the sale.

Valuing your current customers - evidence suggests that it costs from 6% to up to 10% more to attract new customers than to sell to your existing ones, so maybe you need to focus on your current customers first.

Online marketing, including through social media that has a 'call to action' - many websites are developed with information of the business and not much else. You need to entice the customer to buy, so there needs to be some 'hook' for them to contact your business. Other forms of social media are more effective at this but often the same applies to these.

Dealing with your customers

Invoice quickly - deliver products as soon as they are ready and invoice when sale is completed, not monthly – you might like to look at how to prepare an invoice.

Request a Deposit - for special or large orders request a deposit.

Easy payment options - provide a variety of payment options for your customers to make payment easy and quick. Some examples include credit cards and direct deposit into your bank.

Provide payment incentives -
providing incentives to pay early (but make sure such incentives do not eat into your profit too much).

Outstanding payments -
have a process in place to follow up outstanding payments regularly – refer to debt recovery section.

Customer disputes -
have processes in place for quick resolution of customer disputes that can hold up payment.

Managing stock and suppliers

Use supplier terms - make full use of your terms of trade as this equates to an interest free loan.

Move aged stock - replace slow-moving and obsolete stock with stock that has a faster turnover.

Monitor stock levels  - track the movement of your stock and have processes in place to identify when new stock should be ordered.

Just in Time stock orders  - seek suppliers that will provide you with stock only when you need it – that way you will not waste cash paying for stock to sit in the warehouse or back room.

Staff and cash flow

Flexible staffing - match the roster system to the peak periods etc. and have flexible staffing arrangements in place.

Sales commission - only pay commission to your sales staff when the payment is received, turning your sales staff into de facto debt collectors.

Reward staff - have measures in place to reward staff behaviour that improves cash flow, such as setting sales targets, reducing expenditure or paying commission on collection of payment from customer.

Other tips

Sell unnecessary assets - many business accumulate assets that they no longer require.  Selling unnecessary assets will increase the cash in the business and save on costs such as insurance and storage.

Buying assets - if you need new assets, consider leasing as this will 'smooth' out cash flow if appropriate.

Prepare regular cash flow forecasts - cash flow forecasts will help you identify any potential cash flow shortages in the immediate future.  Once you have prepared a cash flow forecast run 'what if' scenarios to measure how reactive your cash flows will be to certain changes in events, such as decreases in sales.

Invest surplus cash - use interest bearing bank accounts for any surplus cash your business may have.