December 14, 2016

Reduce Risk & Grow Your Cash Flow

A healthy cash flow is the lifeblood of every business, particularly in light of recent times, where the current economic climate is uncertain, cash collection is sporadic, and the sourcing of credit can be challenging at the best of times.

The implementation and the effective use of a good cash flow management system is a must for all businesses, as the day to day cash flow requirements of a business must be met, in order for the business to survive.

Key considerations:
1. Does your business have a cash flow management system in place?
2. If there is a cash flow management system in place, is it effective, up to date, and being monitored regularly?
3. Are your cash flow forecasts and assumptions realistic?
4. Are monthly cash flow statements being produced, and if so, are they being fully utilised to their best potential?
5. Do you have a structured cash collection procedure in place?
6. If so, do you have a designated staff member in place to deal with cash collection, a person who is suitably qualified, and experienced in this role?
7. Is there a clear record of correspondence being kept between you and your customer?
8. Do you have a process for debt recovery where payments are not received?

The businesses collection strategies will also have to be borne in mind, considering many factors such as issuing invoices for payment at the appropriate times, follow up contact, or for example, making a note in your diary to contact customers say one week before the month end, particularly customers with large balances due. Regular contact with your customers is a must, in order to reduce any arguments or disputes that you may have with your customers in the future, and to reduce any possibility of “excuses” being made by your customer, which may result in a delay of payment. Other matters for consideration would include the credit terms agreed with customers, the payment profile and history of your customer, and particular attention should be paid to high risk accounts, preferably at the earliest opportunity.

Managing Cash Outgoings & Overheads:
The managing of cash outgoings / overheads also need some close consideration. Business owners do feel that they have a level of “control” when it comes to decisions regarding expenditure items relating to their business. It is advised that all business owners review their overhead costs “line by line” as potential savings can be achieved in key expense areas such as utility costs, wages & salaries, and purchasing costs, due to the availing of bulk buying discounts.

The key to avoiding any cash flow problems is to identify potential problems early, and to take appropriate action immediately!

At UHY FDW, we work with businesses to ensure you have cash flow visibility and the most suitable cash flow system in place to meet your cash flow requirements.

Contact one of our business experts now using the form provided to have your cash flow issues resolved.