Our top tips to strengthen cashflow
Improve your credit control approach
Have a mindset of being paid by your customers on time, every time and wrap a robust process around credit control so you’re not exposing yourself to the risk of bad debt over the coming months whilst optimising your cashflow.
Remember credit control isn’t just about chasing payment, it’s the whole process from agreeing terms up front and credit checking customers, right through to invoicing promptly, offering different payment options, following up and, when required, escalating collection.
Don’t forget to regularly review whether customers have earned the right for you to offer them payment terms.
Keep a watchful eye on your margins
This is important in every business, it’s easy for seemingly small costs to erode margins, but it’s especially important if you’re a service business. Measure the revenue (and profit) each of your billable people is generating for you – make sure everyone in the team is contributing a profit. If you start to lose clients, it’s easy to hang your hopes on new business and keep too much capacity in the business which will eat away at your profits and your cash. Be mindful, be realistic and make decisions to address over-capacity quickly. You’ll be able to find people when you need them when that new business really does arrive.
Manage your stock holdings
It’s easy for stock to get out of control, especially in times like now when possible reducing demand and pipeline intelligence doesn’t make its way into your procurement process. You need to keep a watchful eye, reviewing your re-order levels and making sure your purchasing people have visibility of your sales forecasts. If you are over-stocked, and demand is falling then generating some quick cash will all help. Conversely, if you’re selling more (e.g. PPE) then re-examining your re-order levels and your key suppliers gives you a chance to negotiate by consolidating orders.
Manage your overall cost base
Every cost has to earn its keep, more so now than ever. Take some time to review everything you’re buying in your business and aim to cut all non-essential or redundant costs. If your turnover is reducing a really quick way to check your cost base is to look back to a time when you were growing and you grew into your current or projected revenue – when we’re growing we nearly always invest behind the growth – when we’re shrinking we tend to cut behind the shrinking.
Analyse your marketing activities, channels and spend
Evaluate which channels find you the right clients, at the right cost of acquisition and which channels just cost you money with no return. If you don’t know the answer to this you need to get that clarity and start to know where you get the biggest bang for your marketing buck and where you’re wasting your money. Also, review your sales funnel and where there may be an issue or bottleneck. It may be your team are great at booking sales meetings but not so great at converting them (or vice versa) – it will tell you where you can press a lever and wring every last bit of juice out of your pipeline.
Can we help?
Whatever the circumstances you find your business in, know that you’re not alone. We’re here to help – just get in touch.