How can a business improve cash flow? (Main causes of cash flow problems …
How can a business improve cash flow?
Increasing cash inflows
Chasing Debtors: Getting the people who owe you money to pay it or give them a shorter credit period
Arranging loans: securing bank loans to help keep the business going in difficult financial times.
Arranging an overdraft with the bank: this would hep a business if they find themselves in a short term cash flow crisis.
Turns in wanted things into cash
anything the business owns
risk - may need their assists
Reducing cash outflows
Delaying your payment of bills: arranging to pay your bills when you can afford it instead of using you savings or getting loans.
Delaying buying expensive equipment: businesses should wait until they have enough money to buy equipment otherwise their cash outflows will be high.
Securing better trade credit deal terms: agreeing to pay a supplier over a longer period of time.
Wage cuts: letting employees who are non essential go or reducing wages (however this can put a strain on the remaining workers)
Stopping customers not paying
Establish debt chasing procedures
Conduct Credit Checks on Customers
Main causes of cash flow problems
Too much stock
Allowing customer too much credit
Advantages of having good cash flow
Money at hand to pay expenses
Invest in new equipment
Expand your business
Diversification of products
How to handle Cash Flow Problems
Have an accurate cash flow forecast
look at seasonal trends to plan for the future
Choose the right financial source
Use your working capital effectively
Get rid of the stock in business