Cash flow is the lifeblood of any business and, as every financial manager knows, tracking, reporting and forecasting it accurately and thoroughly is no mean feat. You want to keep track of all your outgoing and ongoing expenses, and make adjustments when necessary.
From gathering and checking various data inputs from previous financial years, to playing around with multiple prospective scenarios, and anticipating upcoming trends, developments and even unforeseeable emergencies — the time and effort involved in cash flow forecasts is immense.
Below we’ve rounded up some simple ways to improve cash flow forecast and boost cash flow — from improving financial reporting through to fast-tracking debt recovery. So keep reading for some ways that you might be able to maximise your cash flow forecast for the future!
1. Get invoicing + payment terms right
Start with the basics, and make sure your invoices are issued promptly, with clear payment terms and payment options. Beware of offering long payment terms, unless you have a solid mix of varied payment terms with other clients.
Shortening the payment terms to speed up the invoicing and collection process can be a great way to improve cash flow, but should be communicated with clients from the outset.
2. Minimise unpaid invoices
To prevent unpaid accounts from accruing, brainstorm ways to incentivise clients to pay on time. Consider spreading out payments over an agreed upon time span, rather than demanding payment upfront. This will make the customer less likely to default on payment halfway through the project. Remember, improving your cashflow is all about working smarter, not harder. If you ever have trouble reclaiming payments, then you can enlist the help of Prof Coll! We are an expert debt collection agency, that can help get your money back where it belongs!
Additionally, ensure all staff are upfront about any service costs or additional extras, so clients don’t get any surprises when it’s time to pay. This will minimise invoice disputes leading to payment delays.
3. Get on top of overdue accounts
Follow up on any unpaid accounts early and often to prevent debts from accruing, and monitor your accounts receivable on a regular basis.
If, like many businesses, you have a bad debt or two weighing down your cash flow statement, consider the opportunity costs involved in pursuing the debt yourself versus bringing on debt recovery experts. This is particularly relevant in cases where investigation may be necessary to track down hard-to-reach debtors or if the debtor is facing liquidation. If so, it’s best to utilise the services of an expert debt collection agency, such as Profcoll, in order to recover your assets.
Take our quick and easy online quiz to find out whether your debt is likely to be recoverable. Click the image below to start the quiz.
4. Negotiate with suppliers
The question of how to maximise cash flow is one for accounts payable as well as receivable.
If your firm has a solid working relationship with your suppliers, keep in mind that paying on time or even early on your own accounts can put you in good stead to negotiate discounts or more favourable payment terms in future. Rearranging regular payments to times of less financial pressure can also help relieve cash flow pressure during more challenging periods.
You may also like to look at ways of getting your stock on more favourable terms; the Tasmanian government recommend looking at options such as consignment stock, extended credit terms, or forward dated invoices for seasonal purchases.
5. Optimise your cash flow forecasting techniques
Improving cash flow forecasts means going beyond the standard forecast template. Fine tune your company’s cash flow forecasting techniques by:
Three-way forecasting: include a profit and loss summary, balance sheet and cashflow statement.
Setting specific cash flow attributes for every line: mark quarterly payments versus monthly payments, and lump sum costs versus those with upfront deposits.
Building a dynamic model using underlying operations drivers.
6. Analyse the patterns
Of course, it takes more than collecting data to boost your cash flow forecast. Wherever possible, actionable insights are required to plan ahead and prepare. Improving your cashflow is all about working smarter, not harder, so make sure the changes you make don’t create too much extra work for your employees.
During your all-important cash-flow analysis, look out for the usual payment cycles and seasonal trends. Look for further opportunities to leverage the cyclical highs and lows throughout the year within your business strategy.
Sharing this crucial information with other departments and teams can drive a company-wide approach to improve cash flow — by refining systems and processes, or mapping out seasonal initiatives.
For instance, you may like to boost marketing strategies during the quieter months to offset a decrease in cash flow from operating activities or seek to secure a line of credit in case of any emergencies during lulls. Improving your cashflow forecast is about making the most of your income, challenging it where it’s most effective.
So, now you know how to improve your cash flow. It’s time to put the theory into practice, so get going and good luck! If you ever find your cashflow interrupted by a pesky debt, you might be tempted to try to recover it yourself. To save yourself the hassle, turn to Profcoll when you need help collecting outstanding debts. We’re back by 23 years experience industry, and we have experts that know how to get the job done. To recover those pesky debts, choose Profcoll!