To repeat a well-used adage, ‘cash is king in the business world’, and a healthy cashflow is essential for a firm to operate at its optimum level. Martin Cooper, director at Lloyds TSB Commercial Finance offers his top ten tips to ensure your cashflow remains robust:

 
1.Plan your year - Regardless of sector, many businesses experience annual peaks and troughs in demand. Prepare for these and put in place measures to ensure your cashflow can grow in line with sales.

2.Don’t bulk buy - Aim to hold as little stock as possible and turn it over quickly. Unsold stock is only potential cash and it can drain liquidity. Careful planning should eliminate this.

3.Keep costs down - Ensure all your processes are as efficient as possible, for example, turning off one PC overnight can save over £50 a year. Also ensure you shop around for the best product and energy prices.

4.Negotiate credit terms with suppliers - Ask if suppliers offer discounts for early settlement and if annual costs can be split into monthly payments. This will regulate cashflow and eliminate a hefty bill at the end of the year.

5.Manage staff wages - For many businesses, the monthly payment of staff wages can strain cashflow. Schedule these outgoings carefully and ensure staff numbers are kept in line with busy periods.

6.Invoice promptly - Ensure your bills are issued as soon as possible and make your payment policies clear at the time you initially engage with customers. It is also essential to enforce these payment terms and if a customer doesn’t pay, put them on a stop. Often, it is better to miss a sale than not to get paid for one already made.

7.Credit check customers - Carefully vet potential customers’ credit histories to minimise possible late or non-payments in the future.

8.Keep a close eye on late payments - If the amount that you are owed by your customers is growing faster than your sales, this could indicate a credit control issue.

9.Spread risk - If you’re concerned about a particular contract, consider taking out insurance to cover all trading with that customer or against individual invoices. Over-reliance on one supplier could also leave you vulnerable if they fail so use credit checks and dual source.

10.Consider invoice finance - These facilities leverage the value of up to 90% of a firm’s issued invoices. The funding releases the value of these bills, ensuring cashflow grows in line with sales, and bridges the gap between issuing an invoice and receiving payment.

Martin Cooper is director at Lloyds TSB Commercial Finance, one of the market leading providers of asset based finance.