How to get more cash?
Author: Russell SmithFebruary 19, 2012
Cash is the lifeblood of a business, it is the oxygen that makes everything else in the business possible. A business with no cash not only restricts growth but it saps time and energy away from key people in the organisation. A business with no cash ends up being one where fire-fighting is the norm.
The systems around cash in a business are the most important systems but it is often a system which is overlooked.
There are 3 main steps to getting more cash in your business….
Firstly, produce a 3 month forecast every month. This will be time-consuming at first, but after a couple of months it will become easier. It is essential for a growing business to know what is coming around the corner and be able to predict cash gaps and ‘surprises’. It can be troublesome when the cash forecast is showing a dip at the end of 3 months, it is much worse if you predict it at the end of next week.
Secondly, cash problems in business are not really down to cash but down to the payment terms. You want your payment terms to be as favourable to you as possible. I would encourage any business to test this until you are blue in the face. Don’t just look at what is industry standard, play around with different terms, be bold with it. The difference between 7 days and 30 days can be massive.
Thirdly, it is a great step to have favourable payment terms but if you forget to invoice the customer then the cash will not come in. It is very rare for a customer to helpfully to tell you that they haven’t been invoiced. The longer gap between the sale and the invoice the increase or risk of payment problems. Work on the invoicing/sale system which leads to cash so that there are no gaps, no bottlenecks, ensure it runs smoothly. This may take some time (it could take 3-6 months and software investment) but it will be worth it.
The result of your efforts will be reflected in your bank account which is always very satisfying!