Cashflow Management

Cashflow problems and how to avoid them

No matter how effective your negotiations with customers and suppliers, poor business practices can put your cashflow at risk.

Look out for:

• Poor credit controls - failure to run credit checks on your customers is a high-risk strategy, especially if your debt collection is inefficient - for additional information see our business advice article on debt recovery.

• Failure to fulfil your order - if you don't deliver on time or to specification you won't get paid! Implement systems to measure production efficiency and the quantity and quality of stock you hold and produce.

• Ineffective marketing - if your sales are stagnating or falling, revisit your marketing plan. Are you targeting your customers properly - or is one sales executive bringing in all the business?

• Inefficient ordering service - make it easy for your customers to do business with you. Use first class post and, where possible, accept orders over the telephone or Internet. Ensure catalogues and order forms are clear and easy to use.

• Poor management accounting - keep an eye on key accounting ratios that will alert you to an impending cashflow crisis or prevent you from taking orders you can't handle. Find out more in the Business Link guides on how to identify potential cashflow problems and avoid the problems of overtrading.

• Inadequate supplier management - your suppliers may be overcharging, or taking too long to deliver. Put in place a supplier management system - see the Business Link guide on how to manage your suppliers.