Cash flow problems are one of the main factors of business failure. A large unpaid yard and it can quickly become a disaster. A great principle to
eradicate cash flow problems: work on your profitability. Because the more profitable your business, the better your cash flow.
Good practices to improve cash flow
WHERE DO THE CASH FLOW PROBLEMS COME FROM?
The lack of cash is usually related to business management issues:
- Lack of profitability
- Lack of activity, customers, market
- Lack of anticipation and managerial management (seasonality, unpaid customers …)
LIMIT THE RISK OF UNPAID BILLS: YOU ARE NOT THE CLIENT’S BANKER
Here are 10 tips to limit this important risk, especially in very small businesses:
- Do not start a construction site or a service until the quotation is accepted and signed: “Good for agreement”, dated, signed, the client’s name written in clear by the latter. If there are several pages, they should all be initialed.
- Request a deposit of 30% minimum to validate the order.
- Make advance or progress invoices(situations) for large yards, or long sites
- If during construction or service, a deadline is not set at the scheduled date, notify the client that the site is suspended until payment.
- Present the invoice and get the balance on the last day of the construction site after checking the end of the site with the client
- Relaunch clients when the payment deadline is exceeded
- Complete the “near completion” projects and bill them before starting new ones
- Be uncompromising with bad payers
- Quickly pour money into the bank
- It is possible to use factoring to get paid more quickly, it will be necessary to integrate these costs in the quote
KEEP THE MONEY IN THE COMPANY
Depending on the circumstances, especially if interest rates are low, it is better to borrow as part of an investment than pay cash: do not draw in your cash unnecessarily, you increase your risk of default.
- Respect the deadlines of your bills, but do not pay before the deadline
- Limit stocks
- Control expenses, know how to track down waste
- Balance large yards that consume cash and small projects that can get money back faster
- It is essential to be well insured according to its activity and its specificities
MEASURE AND ANTICIPATE THE IMPACT OF YOUR DECISIONS
Before investing in new equipment, a machine, a shed, ask yourself the question: Can I invest? Of how many? What will be the consequences of my result and profitability?
You lack resources and want to hire? Are you able to do it? At what level of salary and skills?
Oversized investments or poorly negotiated hiring will penalize your cash flow.
NEGOTIATE YOUR PAYMENT DEADLINES
- Feel free to negotiate payment terms with suppliers or service providers.
- Play the competition between suppliers, to have the best conditions.
- Play also your loyalty as a customer
MAKE A CASH FORECAST
Managing a business is knowing how to anticipate. Regarding your cash, here are my tips:
- Anticipate future expenses. Example: the RSI pays 2 years after winning the money
- Anticipate working capital requirements, particularly in the context of business growth
we in ceo4edu centers can set up a cash flow forecast and follow up. You will be able :
- Visualize your inflows and outflows over the water
- Detect upstream cash flow difficulties to plan corrective actions
- Create scenarios and simulate the impact of your decisions on your cash flow
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