In 2023, businesses are facing additional challenges that have a direct impact on their profitability and cash position. It's more important than ever to focus on cash management strategies to ensure your business remains strong and resilient.
So here are a few tips to help better manage that position, i.e. your cash position:
Review your T&C's with existing clients
One effective approach is to review your payment terms with existing clients. Shortening payment terms can improve your cash position and give you greater control over your cash flow.
Stock & Stock Turn
Another key factor in cash management is stock and stock turn. For larger orders, consider requiring a sizeable deposit from specific clients to help mitigate risk. For those holding stock, stock turn is a good indicator of whether you are effective or ineffective in managing stock level. By tracking how quickly you sell your inventory, you can gauge how effectively you are managing your working capital and converting it into cash. This information can help you make smarter decisions about purchasing and managing your inventory.
Deal with debtor queries early
Debtor queries can also impact your cash flow. Make sure you address these queries promptly and work to eliminate any obstacles that may be slowing down payments. By staying vigilant and enforcing your payment terms, you can improve your cash position and protect your business from unnecessary risk.
Avoid unnecessary spend
It's also important to be mindful of unnecessary spending. By tracking your expenses and identifying areas where you can cut back, you can reduce the outflow of cash from your business and improve your overall financial health.
Know your breakeven cashflow position
Finally, understanding your breakeven cashflow position is critical. This means knowing the income you need to generate on a weekly or monthly basis to cover all of your known cash outlays, including debt servicing, principal repayments, and tax responsibilities.
Managing your cash flow can be challenging, but it's essential for any business that wants to remain competitive in today's disruptive environment. By implementing these strategies, you can improve your cash position and ensure your business remains strong and resilient in the face of ongoing challenges.