Many times we see businesses that are profitable on paper, but never seem to have enough cash. Here are some ideas to help you look after this critical asset:

Have a disciplined debtor control system. By not collecting debtors you are funding your customers’ business and not your own. You will need to follow up regularly and deal directly with decision makers. Stick to credit terms and check credit ratings. Review existing accounts - often long term customers can pose a great risk because there is no ongoing monitoring of their account.

Bank overdrafts should only be used to fund the day to day operations of the business. When you are buying long term assets use other financing means such as business loans, leases, hire purchases etc that would carry a lower interest rate.

Discounts for early payment of invoices can be useful as the cost of the discount may be cheaper then collecting money later and incurring interest charges elsewhere.
(article from our 2006 newsletter).