PSINovember2018

Improving your cash flow
PSI’s resident business expert Jim
Rathbone reveals his tips for
improving your business cash flow
oor management of cash flow is a common
Pcause of companies forced into bankruptcy.
Even businesses that report profits can
experience problems. Many consume excess
cash as a consequence of poor working capital
management or aggressive accounting policies
towards income recognition.
Of course, if the business is making losses,
that will drain cash and needs to be turned
around, unless this is the consequence of a
planned period of investment in a well-funded
business or a start-up or the scale-up phase of a
business’ development.
Even then, and whatever the case, strong
cash management is essential for survival and
growth.
The following tips should help you to
improve your cash flow management as well as
reduce your stress levels:
1. Be clear on your terms of trade with your
customers and ensure all your customer
facing staff know what they
are.
2. Credit check all new accounts.
3. Invoice in a timely fashion.
Minimise the gap between job
completion and invoicing.
4. Collect payment on
completion/ fulfilment
whenever possible.
5. If you have a project that is
delivered over several months,
agree stage payments with the
client.
6. Give operations the
responsibility to address
outstanding customer service
or delivery issues in a timely
fashion, so that the customer
releases payment to you.
7. Assign competent staff to the
credit collection function. You
need people who are persistent, good on the
telephone and have excellent influencing
skills.
8. Make sure that enough hours have been
allocated to credit collection.
9. Credit collection is a team game not just the
responsibility of the finance department.
Sales and operations involvement is
sometimes needed to resolve product/
service delivery issues.
10. Ensure the business leader takes a high
level of interest in working capital
management and doesn’t just delegate it to
the finance department.
11. Conduct regular 60 or 90 day outstanding
debt reviews and take action to collect the
monies.
12. Identify the top three root causes of
payment delays and fix those root problems.
13. Use an automated sequenced letter process
for overdue debtors.
14. Put customers on stop who are overdue and
“Credit collection is a
team game not just the
responsibility of the
finance department.
Sales and operations
involvement is
sometimes needed to
resolve product/ service
delivery issues”
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