Business Essentials

8 cash-flow boosting tips - Brought to you by Natwest

8 cash-flow boosting tips - Brought to you by Natwest

Thursday, 04 April 2019

Whether you need to get cash into the business quickly or rapidly reduce your immediate outgoings, these tips from SMEs could be well worth considering.


Entrepreneurs who have made adjustments to their business to improve their cash flow share the tweaks that made the biggest result to their bottom line.


1. “I realised I didn’t have to pay every bill the second it arrived”

“When I first started in business it was easy to feel like I needed to pay bills as soon as they came in,” says Sharon Davis, founder of Dales Marketing and the Dales Business Women network. “I didn’t want to feel like I owed anybody.”

The result, however, was lots of stress about cash flow – especially, says Davies, because she was being paid for her services at the end of each month, which wasn’t ideal when there were bills coming through the letterbox. To nudge things in her favour, she negotiated longer payment terms with some of her suppliers.


2. “I created a process to minimise waste”

Waste can be a cash-flow killer, so Udhi Silva, co-founder of snack brand The Snaffling Pig, devised a robust system that alerts his team to stock that is nearing its best-before date.

“Every week, our team provides a report on what product is slow moving as well as what’s at risk of going beyond its best-before date,” he says. “We’ll then look at any sampling or other marketing events, and direct the relevant product to that – which ensures we’re not buying in additional stock for samples.”


3. “I used invoice factoring”

You’re owed £10,000 by your clients, urgently need that money but know it may be more than a month before it trickles in. What do you do? One option is to use invoice factoring – you sell your unpaid invoices to a factoring company that immediately hands over perhaps £8,000 of the money, with the remainder released (minus a fee) when the invoices are paid.

“When we started out, we found that invoice factoring in the short term removed cash-flow pressures and allowed us to focus on growth,” says Rebecca Siciliano, MD of London-based Tiger Recruitment. “We also benefited in that it allowed us to build our reputation with our new suppliers because we were always in a position to meet their bills on time.”


4. “I asked clients to pay a little earlier”

“Most of our clients are on flexible monthly retainers,” says Emily Garnham, founder of PR and branding specialist Tartle Media. “We used to invoice at the end of each month once work had been completed and then have to wait a few weeks to receive payment, which meant that figuring out our financial position could be tricky.”


One simple change solved the problem. “We switched to invoicing on the first working day of the month, giving all clients until the end of the same month to pay,” Garnham explains. If clients aren’t comfortable paying until the work is done, they can simply wait until the last day to pay. “It’s a small change that has made a big difference,” she says.

“It’s important not to neglect slow-moving stock, which ties up working capital and has an adverse effect on cash-flow”


Keith Cole, founder, Pen Heaven


5. “I turned to tech to give me an instant snapshot of our cash flow”

If you don’t have a clear picture of your cash-flow position, it’s difficult to make the best decisions for your business, says Paula Stead, director of protective equipment firm AP Workwear. So one of the best things an owner can do, she says, is to ensure they have up-to-date cash-flow reports available wherever they are. There are a multitude of software packages available that can help with this and many are very affordable.

“I’m often away from my desk, and I previously found it difficult to stay in the loop on important matters pertaining to cash flow,” she says. “If you’re in a similar position, I would definitely recommend accounting solutions that allow you to access your reports from your phone.”

6. “I get buyers to pay up front”

In some sectors – especially those where the customer expects to see the end result first – business owners often only get paid when they complete the job. This can wreak havoc with cash flow, but just because your industry runs this way by default, it doesn’t mean you can’t challenge it.

Cake-makers, for example, sometimes bill upon delivery, meaning there can be little cash coming in during the days that go into making the cake. If a customer defaults, the baker is left with a product they may struggle to sell. To combat this, MY BAKER, a concierge service that works with artisan bakers to fulfil orders, requires customers to pay before the cakes are made. “This ensures we always have the required cash flow to pay our bakers,” says co-founder Yvonne Lam.

7. “I keep a close eye on slow-moving stock”

“It’s important not to neglect slow-moving stock, which ties up working capital and has an adverse effect on cash-flow,” says Keith Cole, founder of stationery retailer Pen Heaven. “Identify slow-moving items and try to understand what the problem is. Are there grounds to return stock to a supplier? Is there an issue with marketing or, if you’re selling online, with how that stock is presented – something that can often be rectified?”

If not, you might benefit from cutting your losses and reducing the selling price. “It’s important for the business to maintain credibility,” adds Cole. “Old, dead stock is repetitive and boring – far better to keep things fresh.”


8. “I call people up when they’re slow to pay”

Darran Rogers, MD of health-and-safety specialist DDR Consultants, advocates calling late payers – but says that rather than picking up the phone and immediately demanding money, the focus should be on having a conversation: you’re calling to find out why they haven’t paid.

“It could simply be that a customer has forgotten or they haven’t been given approval yet,” says Rogers. “I believe phoning someone as opposed to sending an automated email is far better because you’re phoning to find out if there’s anything you can help with. It also allows you to get your tone of voice across exactly as you want it to be interpreted.”

And, of course, it helps to foster relationships – potentially leading to new business.


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