Improve your business's cash flow

The end of the year is a traditional time to take stock of your accomplishments and set targets for the future.

The end of the year is a traditional time to take stock of your accomplishments and set targets for the future. Including an annual business check-up as part of this tradition can help you find efficiencies that may provide you with extra time and improved cash flow.

You’ll need to analyze your current operations using some of the best practice strategies for your operations. Some of the areas where you may find efficiencies are detailed below.

Billing and collections

Wherever possible (should competition permit) consider reducing your payment terms to as short a period as possible. Perhaps you can switch to 15 days instead of 30 or, better still, to ‘on receipt.’ Other ways to improve cash flow include:

  • Thinking about offering a discount – one or two percent – to encourage early payment.
  • Considering offering incentives to collection staff.
  • Mailing invoices on the same day they’re produced. Better still, move to e-billing wherever possible by allowing customers to opt-in for paperless billing.

Inventory

Find efficiencies around your inventory by:

  • Looking for ways to tighten inventory management.
  • Asking your suppliers for discounts – for example, volume discounts for bulk purchases or long-term arrangements.
  • Moving towards just-in-time purchases where possible to maximize available cash.

Banking and financial management

Tighten up the financial management of your business by:

  • Paying suppliers using a business credit card and taking advantage of the interest free grace period.
  • Earning interest on any excess cash available through a short-term investment instrument.
  • Using any spare money to pay down your line of credit.

For more tailored advice on preparing your business for the New Year, remember to reconnect with your Scotiabank Small Business advisor.

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