Unit 5 Essay

Submitted By wizzy123
Words: 363
Pages: 2

7 practical ways to improve your cash flow
Poor financial management is one of the major causes of the failure of small businesses. Many small firms go out of business because of inadequate working capital and poor cash flow management. Below are some pointers on how best to manage your cash flow.
• Know your customer. To do this, you can approach their bank for a reference, use a credit reference agency, or ask their other suppliers. Establish how solvent the customer is and whether they are likely to have any problems paying their invoices on time. Be aware if you ask a prospect for a client reference it is quite likely they will have a stock of good references – it is worth investing in more impartial ratings/references.
• Be clear with Terms and Conditions. Formally agree payment terms in advance and confirm in writing. Devise a strategy for customers who demand longer to pay. One example might be to require a down payment on projects so your customer funds the work not you.
• Offer incentives for early payment. You should be able to recover the money more quickly if you offer a discount for prompt payment.
• Issue invoices immediately after supplying goods or services. Make sure disputed invoices are investigated and resolved straight away. Ensure sales invoices are fully compliant with HMRC guidelines and VAT requirements.
• Plan ahead. Don’t hold too much stock as this unnecessarily ties up your cash. Investigate the