There is no point in increasing
turnover or improving margins if your don’t turn it into cash
-
The main ways you will leak cash are
o
Not collecting money from customers quickly and
fully
o
Not managing your supplier terms and payments
carefully
o
Holding too much stock
Collect money from customers quickly
and fully
-
Have standard terms and conditions which are
geared to getting money in quickly
-
Control the amount of credit you extend to any
customer
-
Invoice quickly
-
Invoice accurately
-
Monitor payments
-
Use a factoring or invoice-financing service
-
See the
separate Simple Guide to: Getting Paid
Negotiate the best terms you can with
your suppliers
-
Aim to pay as late as possible within agreed
terms
-
Include the credit terms they are offering in
your negotiations with suppliers – try to get the payment time extended. If you are having difficulty in paying make
sure you communicate with them and try to arrange a slower schedule of payments
-
If possible get them to accept your payment
terms and conditions
-
Try to match or exceed the payment terms that
you offer to your customers
-
Pay as late as possible before the due date
-
If there is an error in an invoice or a dispute
over the goods supplied tell them immediately but make sure that the agreed
payment period is applied from the date of the replacement invoice
Hold the minimum amount of stock you
can
-
Limit the range of items you sell as far as
possible within the constraints of your market proposition
o
If your USP is range in stock or speed of
delivery then your stockholding must support this
o
Control what your salespeople are allowed to
sell – restrict the range
-
Set up consignment stock arrangements (you hold
the stock but only pay your supplier when you sell the item)
-
Incentivise your salespeople to sell slow-moving
or obsolescent stock
-
Beware volume deals unless you are sure you can
sell the stuff quickly
-
Ship older stock first – adopt a strict
first-in-first-out approach
