Please note: this is an old article
It was published in January 2012, so the information may be out-of-date.
For most businesses the quickest way to improve cash flow is to get your debtors under control. The quicker you get paid the quicker others get paid. Customers today are averaging more than 50 days to pay-almost twice the normal 30 day terms. But there are a number of tactics that can dramatically reduce your debtors and get the cash back in your bank account.
Greater Shepparton Business Centre‘s Small Business Development Officer Lonnie O'Dwyer encourages businesses to review their cash flow.
"We receive many enquires about improving cash flow and to accommodate those needing some guidance we offer a workshop later on in the year solely dedicated to this issue," Ms O'Dwyer said
"The one mistake business owners make is allowing flexibility in payment methods, although this may be seen as good customer service it may also mean you're not around long for your customers.
"Introducing clear payment expectations when new clients come on board is the best way to form a healthy business relationship."
Some tips for improving your cash flow are:
- Make sure your invoices are clear and state the due date and give easy payment options.
- Show ageing on statements as current, as 30, 60, and 90 days can encourage late payments.
- Send statements as most businesses delay payment until they receive the statement.
- Send invoices as they occur, not at the end of each month.
- Follow up regularly using this opportunity to further build relations and increase sales.
- When debt collecting be mindful of your methods, keeping the customer happy is your priority.
Below are some tips for reducing you stock levels
- Develop an online catalogue for customers to view your products and order online.
- Turnover your stock regularly discounting to move the stock before it's dated as it's better to receive money back on the item then not selling it at all. Manage this carefully as sometimes you can train your customers to wait until the bargain bin comes out before they will buy.
- Stock on the shelves in some case is dead money; keep this money in the bank by improving how you display your stock. Do you really need to display 10 of one item when it only takes 24 hrs for new delivery of the stock.
Lonnie recommends assessing your current payment options.
"Great customer service doesn't always encourage prompt payment. Review how you are perceived by your customers and why they are paying so late. Your customer will pay you dependent on the importance of your product to their business.
"Identify how you can turn your product into a priority for your customers. Implement change slowly and inform your customers as to why and when you are changing, most customers will understand as your business is growing and you want to be available for them in the future."
"Start a database of your regular clients and those who are receiving accounts to keep track of when they pay, this will allow you to manage your cash flow better.
"Review your future customer's needs as some companies do not run accounts anymore and require payment before shipping." Lonnie said.
To find out more about the cash flow seminar and other workshops being held this year visit www.sheppartonbusiness.com.au or phone Lonnie on 03 5832 1100