Cash flow problems kill more businesses than lack of profitability. Even profitable companies can fail if they can’t meet immediate obligations.
7 Proven Cash Flow Strategies:
1. Accelerate Receivables Offer early payment discounts (2% for payment within 10 days). Invoice immediately upon delivery. Use automated reminders for overdue accounts. Consider invoice factoring for immediate cash.
2. Manage Payables Strategically Take advantage of supplier payment terms without damaging relationships. Negotiate extended terms with key suppliers. Schedule payments to match your cash inflow cycles.
3. Implement Rolling Cash Flow Forecasts Create 13-week rolling forecasts updated weekly. Identify cash shortfalls before they become critical. Plan major purchases around strong cash periods.
4. Reduce Inventory Investment Implement just-in-time ordering where possible. Negotiate consignment arrangements with suppliers. Liquidate slow-moving stock through promotions or discounting.
5. Diversify Revenue Streams Reduce dependence on major customers. Develop recurring revenue models where possible. Consider complementary products or services that smooth seasonal fluctuations.
6. Optimise Working Capital Monitor debtor days and creditor days monthly. Set credit limits for customers. Regular credit checks prevent bad debt surprises.
7. Build Cash Reserves Maintain 3-6 months operating expenses in reserve. Consider business credit facilities before you need them. Banks prefer to lend to businesses that don’t desperately need money.
Warning Signs to Monitor:
Increasing debtor days, declining gross margins, delayed supplier payments, increased reliance on overdrafts, and customer concentration above 20% of total revenue.
Regular cash flow management isn’t just about survival—it enables growth opportunities and reduces financial stress for business owners
