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Improving Cash Flow

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Cash flow is the life blood of every business and lack of cash is a much more significant cause of business failure than trading losses. The management and preservation of cash is a priority task which must be performed day in and day out in every business. This task is so routine that its importance is often overlooked.

Here are some ways to improve cash flow:

  • Sales - Become more selective when granting credit.
  • Costs & Systems - Improve systems for billing and collection.
  • Credit Management - Generate regular reports on receivable ratios and aging.
  • Purchasing - Make prompt payments only when worthwhile discounts apply.
  • Inventory - Sell off or return obsolete/excess inventory.
  • Investment - Use leasing etc. to gain access to the use of productive assets.
  • Financing - Use factoring or discounting to accelerate receipts from sales.

For a list of over 30 ways of improving cash flow, visit the Checklist for Improving Cash Flow.

Central to any program to improve cash flow is an accounting system to handle inventory, invoicing, receivables and payables. Allied to this is the need for frequently-updated cash flow projections to provide early warnings of possible liquidity problems and a foundation for improvement plans.

For more on this, see the paper on Making Cash Flow Forecasts and download and try our Cashflow Plan software tools for making rolling 12-month forecasts and creating cashflow improvement plans.

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About this Entry

This page contains a single entry by PlanWare published on August 15, 2011 2:58 PM.

Raising Finance from Venture Capitalists, Business Angels & Banks was the previous entry in this blog.

Marketing Strategies, Sales Plans and Projections is the next entry in this blog.

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