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Gloucestershire Business News

Cash - the greatest source of funding of them all - Claire Clift, partner at Azets

By Claire Clift, partner at Azets 

Hopefully, we're emerging from one of the most challenging and testing periods in a generation. For many businesses it has been a time of struggle and survival, but as we find our feet again and readjust to once familiar, albeit now slightly flexed ways of working, it is time for businesses to consider focusing on growth and expansion.

A growing and expanding business needs fresh injections of funding and capital to provide the much-needed working capital to facilitate that growth.

Therefore, we need, more than ever before, to be focussing internally on the greatest source of funding of them all - the cash generated by the business itself.

Claire Clift, Partner at Azets discusses six critical ways to ensure that your business is cash generative.

1. Issue your sales invoices as promptly as you possibly can

This is the first step in making sure that the work you do generates cash. As soon as your work has been completed, or the service has been provided, issue a sales invoice as promptly as possible, and ideally electronically. Make sure all invoices follow a template. Accuracy is important as errors can lead to delays in settlement. Ensure your customer data is up to date, take time to check names, addresses, invoice numbers, customer references, purchase order numbers, narratives, VAT and invoice totals are all accurate. A little care at this stage can pay huge dividends in terms of collecting the cash quickly.

2. Have clearly set and well-communicated payment terms

It's important that your customers know what you are expecting from them in terms of payment. Ideally, set out your terms and conditions in a letter of engagement for your customers to sign, and have the terms and conditions included on your invoices and other documents. Be clear about what is being provided, how much it will cost, the project timeline, when payment is due, and what happens if payment is late. Clearly setting out your expectations will limit disputes and delays and will help you collect the cash promptly.

3. Have a strong credit control function with robust procedures and protocols

Employ a strong credit controller who recognises the importance of using the latest technologies to improve the credit control process, who will chase every overdue payment, who will put poor payers on a stop list and who won't be afraid to outsource tricky debts to a collection agency. Good credit control will help you to get paid quicker, avoid late payment charges, increase your own credit rating, and provide you with the cash to invest in the business.

4. Develop strong relationships with your customers and suppliers

Strong relationships are key - a little rapport with those who pay goes a long way. Knowing the best people to contact is hugely important and it will go some way to ensuring that your invoice is near to the top of the list.

5. Make sure your business and underlying transactions are profitable

It perhaps sounds obvious, but the fundamental building block in cash generation is profit. If your underlying transactions are profitable, then with the right credit control, these transactions will generate cash and working capital. Unprofitable transactions will withdraw working capital from your business. Use the latest cloud-based accounting solutions to manage and report your transactions and financial performance in a way that helps you ensure your business is profitable. Seamlessly sync this data with the latest cloud-based cash flow tools to ensure that this profitable performance is generating cash.

6. Structure your tax affairs effectively

There are a number of tax incentives, strategies and reliefs that you and your company could benefit from to ensure that you are not paying more tax than you should every year. Smart, strategic tax planning helps ensure you are minimising the tax take on the profits and cash you are generating. Tax can be a complicated area so speaking to a trusted business advisor is critical to ensuring you remain compliant whilst maximising the positive effect of the cash generated by your business.

Our team of trusted business advisors help SMEs to grow and expand by implementing strategies to generate more cash. To discuss your business and cashflow or to discuss cash generating strategies, please contact claire.clift@azets.co.uk.

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