Cash Control Checklist
With the economic downturn it is even more important to control your cash. Here is a simple check list to help you.
C hase debtors
- Have you identified overdue accounts?
- Have you made sure you will get paid?
- Do your customers know what "payment on time" means?
- Have you resolved disputes as a high priority?
- Can you improve your payment terms?
- Date your invoices appropriately. Don't give anyone an excuse to delay payment due to you.
- Can you charge interest on overdue accounts?
- Use the Courts if you have to. The Small Claims Court can be used online. For more information look at www.hmcourts-service.gov.uk
- Check your customer' credit worthiness.
- Do your terms of trade stipulate your right to retain Title until payment?
- Maximise cash sales.
A ssess which creditors matter
- Is your VAT and PAYE up to date?
- Don't upset those creditors whose supplies are vital to your survival.
- Maximise permitted payment periods.
- Negotiate deferred payments where possible.
- Talk to them. Keep dialogue open with creditors if your cash is tight.
S tock minimisation
- Have you cut stocks to a minimum?
- Have you reviewed forward purchasing plans?
- Avoid lure of volume discounts.
- Use existing stocks even if some re-working is necessary.
- Turn stocks over quickly.
- Can you reduce wastage?
- Don't accept ordered stock early.
- Make part-deliveries.
H old your margins
- Find out what your break-even point is. To do this multiply your fixed overheads by 100 and divide by your gross margin.
- Don't sacrifice margins for turnover.
- Can you rationalise your product range to concentrate on the higher margin lines?
- Do you know what margins you are achieving on each product/service?
C ut out speculation
- Is your cash profit going into R&D rather than funding the manufacture of developed products or projects?
- Have you abandoned speculative projects?
O verhead review
- Can you reduce your overheads?
- Are your premises too big?
- Can you relocate to cheaper or sublet?
- Should you replace full-time staff with part-time/temps?
- Should you sub-contract any of your work?
N o sales at a loss
- Are you discounting too heavily to win sales?
- Don't confuse turnover with profit.
T urn assets into cash
- Review utilisation of machinery: sell surplus.
- Refinance? Sale and leaseback?
- Factoring of debtors.
- What about old or surplus stock?
R eview forward cash position
- Prepare rolling 6 month Cash Flow.
- Review daily if possible; if not, at least once a week.
- Simple cash expected in/cash out.
- Get receipts to bank promptly.
- Control that cheque book!
- Know exactly what day the payments will hit the bank account.
O nly buy what you really need
- Are you deferring non-essential expenditure?
- Can you lease or buy on HP rather than pay cash up front?
- Only purchase those materials that you are sure you will use quickly.
- Always ask the following questions -
- Can this expenditure be deferred?
- Have alternative proposals been considered?
- Does the purchase represent the best available option.
- Does the purchase represents the cheapest option or can it be sourced elsewhere?
- Does the purchase fall within an approved budget?
L et others know what you are doing
- Have you let the bank manager have a copy of your business plan?
- If cash is tight are you updating him at least monthly?
- This will help you win his sympathy and support.
- Nasty shocks from nowhere will destroy his confidence.
- Speak to support organisations such as Chamber of Commerce or Business link. They may be able to signpost you towards new initiatives such as the government's new Enterprise Finance Guarantee (EFG) scheme or the Donbac Finance 2009 Business Economy Capacity Loans scheme as both are designed to assist businesses in times of liquidity problems. Donbac is in the process of joining the EFG scheme.
- If you need more money consider your own resources, family sources or equity investment first.
- Can any major customer/supplier finance you?
