1. Understand your “cash cycle” in the business – analyse where the money is being “blocked” from freely flowing into profit. Blockages can occur anywhere from raw materials purchase, goods inwards, manufacturing, stock holding, distribution, resellers, and of course debtors. You may need the assistance of an advisor to help you unblock your financial pipes!
  2. Make sure that you collect your debtors efficiently – even now we come across many businesses that don’t have a systematic and controlled way of handling their debtors – with the result that YOUR money is still in your customers’ bank account.
  3. With difficult debtors – who probably have cashflow problems of their own – put them on instalments if you can’t get the whole lot in one go. But don’t let it drag out at a pittance per week – make it meaningful and short. It is perfectly acceptable to negotiate with your customer to ring-fence old or outstanding debt into a term loan with interest charged to your customer – and the deal is dependent on them keeping their account current and tidy. The term loan is then registered – and you are a secured creditor.
  4. Before someone becomes a problem debtor – make sure you are taking deposits, progress payments or materials payments. These strategies make a huge difference to cashflow, but your systems need to be robust. All customer cash and deposits need careful accounting and reconciliation – remember a deposit paid to you is money OWED to the customer until the work is done.
  5. Lodge all debtors of any size with the Personal Properties Securities Register, and make sure your terms and conditions of trade are updated to the latest form, including the PPSR and the rights to repossess goods. The old Romalpa clause is gone, but most of the features can be recaptured with careful use of the PPSR wording!
  6. Check all your expense categories carefully – do you need all those vehicles?
    – Should your business be paying for your Marina berth?
    – Are your staffing levels appropriate to your needs over the next 12 months?
    – Are you on the best deal for phones, power, insurance?
  7. Make a summary of all your term loans and Hire Purchases – what are you paying, what interest terms, and to who? Get your accountant involved in seeing if any debt consolidation or re-negotiation is possible. You’ll be surprised how much you are paying on some deals.
  8. Check out alternative suppliers for your raw materials – and negotiate hard. We have had many clients who believed they were on the best deal possible until they shopped around and haggled. In one case – a 20% reduction in a raw material cost was achieved – what would that do for you?
  9. If it is appropriate to your business, talk to your bank about debtor finance (a sort of factoring), but be VERY careful: Factoring or debtor finance is not suitable for all businesses, and your banker may not have the knowledge or experience needed to correctly advise you. Talk to your accountant AND an experienced business advisor. A simple rule of thumb is the person earning the commission by selling the service is not necessarily the best person to offer impartial, sound advice.
  10. Make sure your financial and profit measures are in place – job by job and month by month. Every job should be back-costed to check quoting and production accuracy. All unusually high or low profit jobs should be checked and the reason worked out. Check your staff productivity rates – both internal and external productivity ratios must be checked. It is very easy, with a staff of ten, to lose the equivalent of a “person week” each and every week.

 

Talk to your brokers, vendors and suppliers. Play one off against the other and get the best possible deal!

When you’ve done all that, increase turnover by having a look at new markets for your existing products or services, or new products and services for your existing customers, use professional help to get your marketing strategies clear, and then push the marketing.

Then see if you can increase the sale price (average value of each transaction) by training the staff in upselling, bundling products together, selling maintenance packages or extended warranties, selling the next related product and similar strategies.