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RSM Bird Cameron suggests 7 ways to boost business cash flow

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RSM Bird Cameron  suggests seven ways to boost business cash flow so that business owners can focus on strengthening and growing their business.

Many small to medium-sized enterprises are constantly under business cash flow pressures due to the volatile economic climate. Andrew Graham, national head of business solutions, RSM Bird Cameron recommends enforcing a clear long-term strategy to improve cash flow and minimise the pressure.

Seven ways to boost business cash flow

Payment on order

By insisting on full payment on order or a deposit upfront at the point of sale, businesses reduce the need to chase up invoices or execute time-consuming collection systems. Full payment may not be feasible in all industries, so a deposit on order may be more suitable for the business.
 
Receivables collection system

An effective receivables collection system could be designed to include:

  • Prompt billing, which encourages customers to pay more quickly
  • Incentives for prompt payments
  • A mechanism for quick detection of overdue and slow payments to enable prompt action
  • Enforcement of payment terms with reminders on a progressive scale
Factoring and finance

Factoring is a short-term funding option that enables the business to access an advance against an invoice for a small fee. While factoring is more common for large organisations, other types of businesses can consider this option in addition to arranging short-term finance options such as a line of credit to help better manage emergency situations.
 
Rethink pricing

The pricing strategy can be a contributing factor to chronic cash flow problems. A company needs to constantly research and review its brand positioning in the market to fix the right price or ask for a higher price.
 
Negotiate with vendors

Negotiating with vendors for longer payment terms can help ease the pressure on business cash flow. Developing supportive relationships with vendors could help the business delay outflows with easier payment terms.
 
Review accounts

Having a solid accounting system that reviews accounts in a timely manner helps the business better understand cash outflows and plug leakages where possible. Better accounting practices can help curb excessive spending and withdrawals in the business.
 
Avoid overstocking and overtrading

Stock and inventory management is an important part of cash flow management. Overstocking must be avoided as excess stock not only ties up cash, but also imposes additional costs such as insurance and storage. The inventory must be constantly checked to reduce or eliminate slow-moving stock items.

Similarly, businesses that consistently overtrade can also find themselves cash-strapped and lacking necessary resources to meet customer demand. Overtrading can be avoided through accurate forecasting and understanding the business' production limits.

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