1. Collect your money at the time of sale or if possible before.
This is where online business or sales via an online channel is advantageous for cash flow. The consumer in their search for information or having been driven to your website, then goes on to want to purchase the product or service there and then. This channel will work for you 24 hours a day, 7 days a week. So you have instant cash flow! There are a number of online merchant accounts available in Australia. If you only have a few transactions per month then a merchant account such as PayPal can be easy to set up and cost effective.
2. Minimise your terms of trade days.
If your terms of trade are 14 days then your suppliers should adhere to this and pay you by the 14th day after the sale date. If your terms of trade are 30 – 55 days then you may want to reconsider shortening this term to shorter duration of time. Providing a financial incentive can sometimes assist in getting these payments in on time. Be sure to consult your legal advisor when negotiating contracts.
3. Chase any outstanding debtors.
Ensure that you begin chasing your debt from the day that it is due. It is your entitlement to be paid for products or services rendered so do not hesitate and follow-up promptly. You should schedule re-occurring reminders every 3-5 business days to chase up outstanding payments. Three business days allows payments to be processed between any two banks in Australia.
4. Try to lengthen your creditor’s terms of trade.
If your terms of trade are on average 30 days then your supplier agreements should be 30 days or longer where possible. This allows your cash a chance to come in before having to pay it out again and can give you a bit more breathing space. If your suppliers are insistent on an earlier payment schedule, it is worthwhile negotiating a discount for up front or early payments.
5. Review your costs: Is it essential or nice to have?
Go through the list of expenses and work out what is essential to your business and branding and what is not. Attempt to reduce costs, shop around and engage staff to come up with creative outcomes. A word of caution however, is to engage with your customers before cutting costs to understand what they value and what they do not value so much about your product/ service experience. The last thing you would want to do is cut costs to something which added to the experience that the shoppers valued, turning them away from your business.
Maria Ioia is principal at Market Intelligence Agency. Contact her at mioia@marketintelligenceagency.com.au or visit www.marketintelligenceagency.com.au
