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Three ways to reduce a cash flow crisis

Supplier: Fifo Capital
15 November, 2012

If you constantly put up with bad debts, you’ll soon find yourself in the same position as your struggling debtors.

Reduce bad debts

For new customers, make sure you confirm payment details up front, including the customer's name, address and ACN/ABN. You may wish to conduct a free ASIC company search, or if dealing with a listed company. 

For smaller transactions, consider an up-front payment arrangement to ensure you get paid on time.

Motivate debtors to pay early through an incentive discount or interest rate on overdue payments. 

Bad debts are bad for business, so be sure to be proactive with respect to bad or outstanding debts.

Know your profit

Having a strong profit margin is different to having sufficient cash flow in the business.

You may be experiencing strong growth, but at the same time you may not have enough cash available to pay suppliers or effectively manage your day-to-day expenses.

Be sure to account for profit and cash flow as two distinct items when preparing your budget and forecasts.

Know your credit terms

Your credit terms form part of the contract with your customers, so make sure you are comfortable with the terms of payment and delivery – and that your customers are clear on them too.

Clear and consistent payment terms will help you and your customers understand the terms of their arrangement with you and the implications of late payment. Don't hesitate to reiterate your payment and delivery terms on your order form, invoice or email correspondence – it pays to get the message across.

To see how Fifo Capital can help with your cash flow crisis please contact us at anytime