“Grim cash flow problems cause the demise of companies, even those with strong sales and abundance of customers,” warns Oak business consultants. As experienced Business Advisors, we can help our clients to keep their cash flows well managed.
Businesses often purchase redundant inventory. Also, negotiation with suppliers has always been a weak point of many businesses, yet they stick with the same instead of searching for a better value for money.
Many businesses aren’t very good at credit control. Some don’t have systems that tell them when payment is overdue. Others fall short when chasing payment – often because they fear losing customers. Time is another issue.
Typically, micro-business or start-up owners have inadequate time for cost and credit management, because they have to manage so many additional tasks, and most of them can’t even afford to hire someone for this. But, if cash is not received before you need to pay, soon the business may terminate.
Therefore, the importance of effective cash flow administration can’t be over-emphasized. These must be known at all times:
A cash flow forecast is an absolute necessity. It allows you to match your likely expenses and revenues to figure out periods in the future when cash deficit can occur. If so, the company can act accordingly to avoid serious issues.
Maximizing sales and margins is vital. A market analysis can tell the business how much it can charge. Adding too much margin may lead your customers away. But if your margins are+n’t adequate then reducing costs is the only option.
Cost regulation is necessary. Unregulated expenses will weaken your cash flow, and the company would waste money in all the areas like:
Since it is possible to make savings in most areas, often the company just needs to analyze options.
Simply asking the current suppliers, how they can provide better value can result in cost savings. The company should evaluate costs periodically, at least every quarter, if not every month.
In the end, any expense should not be authorized without having a sound business reason.
Asking your suppliers for favourable credit terms is also recommendable. The longer cash stays in the company’s bank account, the better – although the company might get early payment discounts. Some companies struggle with negotiations. But nothing gets done without effort.
The following course of action is recommendable:
A summary of tips for Cash Flow Management;
We do offer customized Cash-Flow models. If you require our service to craft your Cash-Flow statements and financial model, feel free to contact us at [email protected] or website: www.oakbusinessconsultant.com and visit the page Financial Modeling.