Have a look at your business, what is the number one problem in your business? Did you say cash flow? I am sure that is what the majority of business owners would answer. I learnt an interesting thing the other day; Cash flow is never a problem in any business. It is simply a measure of the flow through the business. So if cash flow is not the problem then what is?

The lack of cash flow is an indication that there is a problem somewhere in the business.

Here are a few areas to take a look at:

• Too few sales
• Too many staff
• Your pricing; either too high or too low
• Expenses too high
• Slow paying customers

At a business conference I attended, held by a company called Sirdar, they gave us some tips in improving cash flow. There are four areas to focus on.

Before you can grow your business you need to understand the following:

1. Understand your cash flow cycle
• Determine what are the cycles that affect your business
• What commitments have you made that affect the business?• What working capital do you need?• What reporting needs to be done?

2. Measuring your cash flow
• Sales (Cash already received)
• Debtors turnover (How long do your customers take to pay)• Inventory turnover (how much time is there between buying, or selling)
• Do you pay your Creditors on time?• How much cash is there in the bank at the end of every week?

3. Planning
• Set yourself a weekly sales target
• Set yourself a weekly debtors turnover target
• What old debtors do you also have to collect?
• Determine your stock turnover (less holding stock, improves cash flow)
• What old stock do you still have to sell?

4. Plan forward
• What cash do you need for expansion?
• To buy new equipment, new stock, increase the team

It is important to monitor your cash flow, if not daily at least weekly. Always know what money is coming in and what is going out. By doing this, when things get tight things will be easier.

Keep in communication with your suppliers; this will help to negotiate better terms with them. Have a debtor’s management policy and stick to it, if you are soft on your debtors then it will make it difficult to get payment from them. Let your team know when there is a problem with cash flow; they may come up with some suggestions which may help to improve things.

Looking at the above determine how you can improve your cash flow and commit yourself to a date as to when you will implement them in order to move towards a positive cash flow.

Carrie-Anne Diniz

Cents & Accountability

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