So in this week’s tip I want to share with you a number of things I have picked up along the way to help you turn some of those dollars sitting on the shelf into usable cash.

• Benchmark your current inventory metrics against those in your industry. Your accountant should be able to help you with some of this. If not, it doesn’t take much to find some industry data that will give you an idea of how well you’re turning your stock or ‘work underway’ over and into money.
• Review your current inventory systems, processes, and policies. Have you mapped out the steps in your inventory process with time measures in and out to determine whether improvements can be made? Is your inventory system adequate? Do you have one? I was a member of the Logistics Association of Australia some years ago and used it to help my clients make positive changes to their systems, which ultimately translated into improvements in their inventory movements.
• Understand the seasonality in your business. As simple as this sounds, far too few business owners truly appreciate the benefit they can derive by understanding their seasonality in detail. It allows you to improve so many things like forecasting, buying decisions, volumes, holding costs, and whether you need to ramp up your marketing activities to smooth out the peaks and troughs throughout the year.
• Don’t fall for quantity discounts. So often, a supplier will offer you a deal that sounds too good to be true. It probably is. Remember you have to hold the stock, not just pay for it. Sometimes carrying twice the volume for a discounted purchase price can end up costing you more. Beware!
• Develop better relationships with vendors and customers. Again this might sound like common sense. Well, the time to build the relationship is when things are going well. Have a look at how many vendors you deal with. Is there an opportunity to reduce the number to better leverage the ‘exclusivity’ angle? Also your customers will be a great indicator when things change in their buying patterns. Having a few that you can speak with frankly will help you make better decisions on how much inventory you hold at different times and what you hold.
• Is a buying group an option for you? Sometimes, a group of businesses in an industry can get together to purchase items from a supplier or multiple vendors at a better price by pooling their requirements to increase volume and therefore get a better deal. Is this an option for you in your industry? Have you tried before?
• Reducing lead time from order to delivery. Dell were fantastic at this with their ordering and delivery of personal computers and laptops around the world. They invested heavily in relationships and systems that would minimize stock holding and maximize “just in time’ manufacturing to reduce the lead time required to deliver a product to a customer. This in turned saved millions of dollars in holding costs and stock purchases. Where are the opportunities for you?
• Stock promotions. Sometimes you’ll have stock that is nearing obsolescence, or simply have stock that is moving slowly. It’s a good idea to consider some promotional activity to get the word out to your customers. Think about a ‘closed door’ sale for existing customers only, or a direct mail campaign outlining some specials or a product of the month. Why not offer a value bundle where you combine slow moving items with faster moving items? Use older stock as a loss leader to get your customers purchasing more. You could even offer a “Gift With Purchase” or GWP for short using slow moving items when more popular purchases are made. There are lots of things you can do to move your stock and turn it into cash.

Of course, there is a possibility that not all of the strategies I’ve discussed here may be useful to you. There are many factors that will determine what might be your best course of action. Let me know what you think.

The post Free up More Cash in Your Business – Strategies Targeting Inventory and Work In Progress appeared first on Growth Generation Commercial Group Business Broking.

• Don’t send out statements – many businesses send out statements at the end of the month thinking that it’s a reminder to those that owe you money to pay. This might work for some, but for many, a statement is simply a reminder that can go to the bottom of the ‘bill’ pile because another one will come next month! Worse still, some statements have an ageing tally at the bottom starting at “30 days” then going to “60 days” and “90 days” and so on. What this says to the client is “I have at least 90 days to pay before things get serious.” Stop sending statements and replace it with a rigorous follow up process like the one I described in part 1.
• Offer different payment methods – sometimes providing a payment plan, finance, or some form of payment funding can make all the difference between a sale or no sale, and getting your money in a timely fashion or having it drag out for months. Just remember to pick your mark. Don’t offer alternatives to poor payers – seek payment up front. And, remember that if you’re prepared to offer flexible arrangements it’s even more important to follow up immediately if a payment is missed. You could even demand the outstanding amount be paid in full!
• Do a credit check before offering funding or extending a flexible arrangement with any client. I get calls on occasion from people doing trade reference checks on some of my customers to make sure they’re reliable payers. I think this is good practice because with some funding arrangements, if a customer defaults on a payment, you could be left owing the outstanding amount yourself!
• Charge interest for late payment – to do this you need to position it before you enter into a an arrangement to supply your products and services. Don’t just hide in a clause somewhere in your written agreement. Spell out explicitly with the client and get them to verbally acknowledge that this is a term of the agreement you’re about to go into. Otherwise, you could become a fantastic “free” line of credit for your customers. Who wouldn’t take that up?
• Keep track of your aging debtors and do something about it. Monitoring the number of days it takes to turn your invoices into cash in the bank account is an important measure because it shows you how long you have to fund the amount out of your own pocket. The aim is to get the number of days as low as possible!
• Communicate openly and often – don’t let things go. It’s a sign of weakness and provides an opportunity for you to be taken advantage of!

Naturally, every business has its own baggage when it comes to debtors. Whenever I work with a client we look at this first and then determine the best course of action. I have found that this is the best place to get a result quickly that you will see as real dollars in your bank account.

So, now you have 6 more key strategies that work to accelerate your cashflow and improve your cash position as it relates to your debtors. Pick one or more and implement immediately!

The post Unblock Your Cashflow – Debtor Strategies That Work – Part 2 appeared first on Growth Generation Commercial Group Business Broking.

I want to begin by focusing on your debtors – the people that owe you money for products and services that you have delivered. As far as I’m concerned, this is an area that needs a massive focus, not just once, but all the time!

Let’s take a look at some key tips that will help you accelerate your cashflow by calling in your debtors.

• Modify your trading terms – the question here is why do you have the trading terms you do? Are they 30 days? Why aren’t they 7 days? Or 14 days? In most cases it’ll be possible to reduce your trading terms significantly to dramatically accelerate your cashflow. The worst example of what I would call “group think” was an industry and a market that considered it normal practice to allow debtors to pay on the 20th day after the end of the month! Think about that! Depending on when you issue the invoice, your client could have up to 51 days to pay! That’s almost as good as a credit card! Better still it’s interest free even after that date! My guess is you’re not a financial institution so stop offering lines of credit.
• Ask for a deposit at the beginning of the engagement or better still, ask for payment in advance – in most cases there is nothing stopping you except you in getting paid in advance of providing your products or services. If you’re confident in your products and services, why not?
• Appoint a debtors champion – this is a special person who is not afraid to pick up the phone and have the tough conversation. This is also someone that can be relied upon to follow up and follow through on a rigorous ‘follow up’ process.
• Implement a rigorous follow up process – all times below are added to the due date as a guide for the follow up timeline:

+3 days– polite email reminder
+5 days – follow up letter number 1
+9 days – phone call reminder
+10 days – more direct follow up letter number 2
+13 days – phone call
+14 days – final notice (in writing)

Keep in mind, that if you get through to the client and make arrangements, then follow up in the same fashion when those arrangements are not met. Make sure you condense the first contact to +1 day after the date agreed.

• Change the wording on your invoices – the worst thing you can do is use terms like ’30 days’ or ‘net 30 days’ because it is open to interpretation and you won’t follow it up anyway! Your invoice due date has to be a date! Use terms like ‘On or before <<date>>’ or simply use a ‘date’. It works for the power companies so why not you? After the date has passed, refer back to point 4 and get on with following it up!

I’ll continue with some more debtor strategies next week. In the meantime, review these and ask yourself what you can improve to speed up the cash that you have already provided your products and services for!

The post Unblock Your Cashflow – Debtor Strategies That Work – Part 1 appeared first on Growth Generation Commercial Group Business Broking.