Access to debt and equity markets is proving increasingly difficult in the current economic climate, making the freeing up of cash the focal point for many entrepreneurs, says Deloitte, the business advisory firm.
Sam Hart, head of the entrepreneurial business team at Deloitte in Bristol, explains: “For growth businesses, cash has always been a priority.
“Irrespective of the financial health or trading outlook of a company, the benefits of effective cash management and cost reduction are obvious, but never more so than at the moment.
“We’ve compiled a list of ten simple, quick to implement tips to help growth businesses free up cash in these challenging times. Some may appear basic common sense, but surprisingly can often be overlooked in favour of far more complex money-saving initiatives.”
· Customers – ensure that overdue accounts are chased quickly, but fairly. If you offer certain customers preferred terms, can you tighten these without damaging the relationship?
· Suppliers – talk to them, discuss extending payment terms. Whilst they are likely to be under pressure too, if you are a reliable customer with a good payment history, they may be willing to temporarily relax payment terms.
· Bank Financing – banks don’t like surprises so communicate regularly, keep them informed and don’t be afraid to discuss additional funding if you have a plan or an immediate need, but always think ahead.
· Information – make sure you know what’s happening with every penny in your business, or more importantly, that you have the ability to find out. A good financial system will pay for itself in no time.
· Costs – are there areas of fat that can be trimmed? These may not be immediately apparent but a review of the business can identify opportunities that won’t adversely impact performance.
· Operations – is your technology or machinery up to date? Whilst capital expenditure may be off the agenda, even small steps to improve your processes can save time and money, and improve profitability.
· VAT – scrutinise your payments. Many businesses overpay and fail to claim possible rebates. Take advice if you are not clear on how to do this.
· Currency – not for everyone, but if you source materials overseas, you can protect yourself and improve your ability to plan by using the financial tools available to guarantee price.
· Credit insurers – increasingly important both as a customer and supplier. Ensure you have a good relationship and shop around for the best terms.
· Reduce risk – is now the time to reduce the overall risk profile of your business?
