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Cashflow is the life blood of any business. With limited credit available from the banks conserving and the freeing up of cash in a business has become a key objective for many entrepreneurs and small businesses, says Paul Farrell, Partner, W.O. McGrory & Co the Drogheda based accounting firm.
Paul explains: “For any businesses, cash has always been a priority. The benefits of effective cash management and cost reduction are obvious, but never more so than at the moment.
“We’ve compiled a list of 5 simple ways to help businesses free up cash in these recessionary times. Some may appear basic common sense, but surprisingly can often be overlooked in favour of far more complex money-saving initiatives.”
• Customers – Keep in more regular touch with your customers. Pay particular attention to those already outside agreed credit limits. Ensure that overdue accounts are chased quickly, but fairly. Consider offering improved prices or bulk discounts in order to reduce stocks without damaging the trading relationship.
• Suppliers – talk to them, discuss extending payment terms. Whilst they are likely to be under pressure too, if you are a reliable customer with a good payment history, they may be willing to temporarily relax payment terms.
• Bank Financing – Keep communicating with your bank. They don’t like surprises so keep them informed and don’t be afraid to discuss additional funding if you have a plan or an immediate need, but always think ahead;
• System Review – Do you know how your business is actually run from beginning to end? Do you know what’s happening with every penny in your business, or more importantly, that you have the ability to find out. A good accounting system will pay for itself in no time. There are currently excellent deals on accounting software to assist in this regard.
• Costs/Overheads – are there areas of the business that excess fat that can be trimmed? These may not be immediately apparent but a review of the business can identify opportunities that won’t adversely impact performance;