Businesses that use their cash wisely are often rewarded—they require less working capital, have fewer risks from market fluctuations, and enjoy more advantageous credit terms than other firms.
Have a financial plan
The short-term focus of any business must be working capital requirements to ensure trade can continue.
We must assess the current infrastructure, predict upcoming needs, and evaluate our long-term financial commitments in order to ensure a secure future.
A budget will allow informed decisions to be made and is integral to facilitating discussions with your bank and illustrating the mechanics of your business.
Don’t allow creditors to build up debt
Keep a careful eye on debtors and, in particular, the length of time they take to pay.
Implement a robust procedure to review debtors and to identify overdue accounts, or those where there is cause for concern, and follow these up promptly, says Mr Dobinson.
There is also the possibility of negotiating to bring payments forward with an appropriate discount for early payment.
Manage costs
Looking for ways to save money? Taking the time for a thorough review could uncover hidden opportunities to reduce costs and grow financial stability.
If you manage cash and are aware of costs, you can then monitor cost inflation throughout the year – if you truly know your costs, you will look harder at bills when they come in and identify areas of potential savings.
Having knowledge of net margins and costs can be the difference between a successful venture or an unprofitable endeavor. Understanding your production expenditure helps keep companies afloat, allowing for informed decisions about investments that could potentially drag down overall performance.
Recover all VAT
If the business is VAT registered, ensure VAT is being recovered on all inputs – some get missed.