Accountants on cashflow

Managing your cash flow is the single most important factor in surviving in business. It is one of the major challenges to arise out of the current economic climate for almost every business owner. Assets need to be evaluated, liabilities assessed and all income and expenditure items should be critiqued line by line. Businesses need to focus activities in those areas where they are competitive and ensure that they ‘sweat the assets’ to the maximum extent possible. This bulletin offers practical advice to business owners on steps they can take right now to proactively address this issue:

Debtor Management

  • Put a formal debtor management system in place, with clear responsibility assigned to a staff member,
  • Encourage payments up-front by accepting debit/credit cards or by offering discounts
  • Set credit limits, review regularly and stick to them
  • Check out new customers thoroughly,
  • Don’t let anyone or a small number of debtors get too big,
  • Watch out for tell-tale signs that a debtor may have financial difficulties,
  • Use Internet Banking to monitor payments into your account.
  • Implement a defined purchasing process with responsibility allocated to a specific staff member,
  • Get quotes from at least 3 suppliers and go with the one that offers you best value for money,
  • Check out if your supplier offers discounts and/or credit terms, Check if your supplier has a returns policy,
  • Check out if you can charge back any costs of delay to your supplier,
  • Maintain regular contact with your key trade creditors,
  • Pay by electronic means rather than by cheque – this will help you manage the timing of payments from your account.
Stock Management
  • Know the cost of carrying stock in your business – insurance, premises, etc.,
  • Monitor the average turnover times of stock – particularly major items,
  • Sell off slow-moving/outdated stock – sales, special offers etc.,
  • Review your security procedures – make sure no stock is leaving for free,
  • Maintain the ‘right’ amount of stock so cash is not tied up in surplus stock.
With thanks to the CPA,



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