IGF (Independent Growth Finance) have announced 10 resolutions for the New Year that they believe every small business in the UK should take on as best practice going forward in 2010.
Tracy Ewen, the Managing Director of IGF, stated that the New Year should be a time for reviewing what has worked well and what investigating which elements of the business should be changed for the year ahead.
IGF published the following list of resolutions:
1. Plan, plan, plan! Prepare cash-flow projections for next year, next quarter and, if you’re on shaky ground, next week. An accurate cash flow projection can alert you to trouble well before it strikes.
2. The key to managing cash shortfalls is to become aware of the problem as early and as accurately as possible. Financial services providers are wary of borrowers who have to have money today. They’d much prefer lending to you before you need it, preferably months before.
3. Cash-flow problems can often be self-inflicted. Companies which send out incorrect invoices often find that their customers end up returning an invoice and requesting a new one. Make sure all your invoices are correct before they’re sent out to ensure your customers have no excuse for not paying.
4. Make sure you have a robust process for chasing up your invoices.
5. Balancing credit terms versus cash-flow needs is something many businesses struggle with. Be sure to tell your potential customers upfront about your credit terms – before you provide your product or service.
6. Know your customers! Some of your customers will pay on time every time – others will be perennial late payers. The more information you have about the customer, the easier your payment collection process will be.
7. Don’t always associate higher sales with better cash-flow. If large portions of your sales are made on credit, when sales increase, your accounts receivable increase, not your cash. Meanwhile, inventory is depleted and must be replaced. Because receivables usually will not be collected until 30 days after sales, a substantial increase in sales can quickly deplete your cash reserves.
8. Consider using an invoice finance provider. These are financial services businesses that can pay you today for invoices you may not otherwise be able to collect on for weeks or months.
9. You may be able to raise cash by selling and leasing back assets such as machinery, equipment, computers, phone systems and even office furniture. However, you could lose your assets if you miss lease payments.
10. If your cash flow has become stable and predictable, you can consider investing your excess cash. You can earn additional interest income, as well as have the necessary cash to dip into during tough times.
You could argue that everything mentioned above is relatively rudimentary, however, it’s important to remember the basics behind any business. The basics should not only be for new businesses and budding entrepreneurs just starting out. I think that as small business owners become more seasoned with time and experience there is a danger of becoming lax and consequently forgetting the basics that got you where we are today.
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