Tag Archives: Operating Cash Flow

How to Improve your Business Cash Flow

Having a hard time managing your enterprise’s cash flow? Are you tired of having to deal with your customers’ cyclical payment habits and the ups and downs of your business cycles? Have you decided that something must be done, but simply lack the tools to finally do away with cash flow as a going concern? Whilst most enterprises like to think they have a handle on the problem, the reality is far different. These are the enterprises that rationalise their cash flow problems. However, there are others who refuse to accept the status quo and do so by enacting some simple strategies to reduce the impact of a poor cash position. So how can your business improve its cash flow?

The Power of Prepaid Customers!

Whilst most business professionals will agree that prepaid customers aren’t viable options long-term, there is very little to argue as to whether they help reduce the impact of an uneven cash position. Customers that must prepay not only improve your cash position, but they also increase your gross profit on sales transactions. They do this by lowering your enterprise’s financing costs on inventory and receivables. It’s cash upfront so you only purchase what you have to in order to fulfill the customer’s order. Nothing more and nothing less.

Incentivising Prompt Payment Habits

Managing cash flow is also about mitigating risk. That means to incentivize customers to pay early. One possible solution includes providing a 1% to 2% discount on net-10 day terms. However, if you decide to adopt this strategy, make sure you product’s profit margins allow it. Incentivising customers to pay sooner only works if the discount doesn’t erode the margins on sales.

Inventory Management

Having all that money tied up in inventory is extremely expensive. Take the time to define products as fast moving versus those that you need to reduce your inventory levels on. Classify products as essential to hold, versus those products your customers can afford to wait on. This will be much easier once you’ve identified those prepaid customers.

Proactively Manage Vendors

When cash flow isn’t a concern, secure your own prompt payment discounts like the aforementioned net-10 day terms 1% to 2% discount. Take advantage of those instances where cash flow is in your favour. Doing this will ensure you have more money when your enterprise encounters an uneven cash flow period.

Enterprises that adopt these aforementioned strategies are ones that eschew conventional wisdom. They enact simple and effective strategies to reduce the impact of an uneven cash position. Granted, those prepaid customers aren’t viable, long-term pursuits. However, they represent immediate sales and immediate cash!

Guest post provided by Touch Financial one of the leading services for business finance, help, advice and quotes.


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Suggestions to Handle Your Cash Flow with Inventory Management Software and More

One of the most important aspects of your business is cash flow. If cash flow isn’t properly managed, it is possible to be making a profit but not be able to pay all the bills, which is a situation many people want to avoid. Cash flow is not as simple as how much money you are bringing in versus how much stock you have on hand.  With inventory management software and the strategies below, you can work cash flow to your company’s advantage.


One of the first things you need to do is determine what your company’s cash conversion cycle is.  Don’t worry. We won’t get too technical. Your cash conversion cycle is the amount of days it takes for your company to see cold, hard cash from the products sold.  Most business owners have credit from their suppliers. Usually, this credit allows you to pay your suppliers once a month. This is your accounts payable. Then your clients request credit, and their accounts become your accounts receivable.  Once you have received the money from your clients and paid your suppliers, the cash conversion cycle is complete.  Work out how many days this cycle takes. Then try to come up with ways to speed the process up and get you cold, hard cash sooner.


Ensure that your accounts receivable policies are strict; do not be scared to penalize clients who pay their accounts late.  Always send out your invoices in a timely fashion.  Once you have a regular client base, you can generate a report on your accounts receivable, which will help you quickly and easily determine which clients might need a reminder about their account from time to time.


To manage your accounts payable, negotiate flexible payment plans with your suppliers.  Ensure that you are not paying out money before you are receiving money.  Make sure that you pay your suppliers before the deadline, so that you do not damage your company’s credit record.  Electronic transfers allow you to pay your accounts on the day they are due instead of before they are due, giving you those few extra days to ensure you have indeed received money.


Your inventory can often be a very challenging aspect of your business to manage.  Determining which products to keep more of and which are not selling as quickly as expected can be very difficult.  There are many inventory management software solutions available online.  Business self-help websites and books on cash flow will also assist you with these tasks.


To build a successful business you need to have positive cash flow. Once you understand your cash conversion cycle and have a good inventory management system in place, you will be able to fine tune procedures and build your cash flow positively, resulting in a successful business!



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