Cashflow Management

A good cashflow is the result of sound credit management

For many small businesses, it’s all about volume of sales. But without the cash to prove it, it’s a short-lived strategy. Invoicing for payment is one thing, but actually collecting the payment is the main challenge (and downfall) for many start-ups.

Are any of these familiar to you?

  • I struggle to pay my employees
  • Suppliers are chasing me for payment
  • Our bad debts are increasing
  • We have a poor order to cash process
  • Our invoicing is inefficient
  • I expected my cashflow to be better

These business dilemmas are common yet often unplanned. They don’t fit with a strategy to grow and can be a huge hindrance to a business needing to meet existing (and planned) financial commitments.

Cashflow management
Cashflow management

Should I increase my sales?

Getting more sales into the business may seem like the obvious route to addressing these everyday issues. But the fact is that sales don’t always equal cold hard cash, and that is what most small businesses really need.

Instead, you should focus your attention on getting your customer invoices paid quicker by improving your credit management processes.

My invoices are always sent

It’s about more than simply invoicing your customers; that’s just a tick in the box. What you really need is a comprehensive process that only ends once you’ve received payment.

This should include:

  • A credit policy aligned to your business objectives
  • Implementation of realistic credit limits
  • An adopted credit management culture
  • Buy-in from the sales team, customer services and finance
  • Creation of a dispute management process
  • Billing procedures that are followed and reviewed
  • Efficient order to cash practices
Cashflow management

How can I improve my cashflow?

Cashflow is fundamental to the running of any business and can be the difference between achieving your growth plans and not.

You can focus on a positive cashflow and the money coming into your business by:

  • Introducing a simple yet effective accounting system
  • Maintaining accurate and up-to-date reporting
  • Applying strict payment terms for customers
  • Keeping business and personal finances separate
  • Building a cash reserve
  • Only taking on necessary external finance
Cashflow management

“A client’s shipment was deferred by the customer for 3 months creating cash flow problems which made it difficult to pay suppliers. Pegasus arranged a rolling loan in less than 10 days giving the flexibility for my client to only draw down what they needed. Thank you Pegasus!”

Robert Hockley, MD – Chiltern Group