1. Monitor and Manage Stock/Inventory: Keep a close eye on your stock levels to avoid overstocking or understocking. This will help you optimize your working capital and prevent tying up cash in excess inventory.  By setting minimum and target stock levels for your products, it gives a picture on what needs to be reordered and when.  Make those minimum and target stock levels dynamically based on historic sales patterns and average lead times from suppliers and you can be more responsive to the shifting demand for different products.

 

2. Negotiate Better Payment Terms: Negotiate favourable payment terms with your suppliers to extend the time you have to pay for stock. This will give you more time to generate sales and collect payments from customers before paying your suppliers.  Working as a member of an active Buying Group is one option to have the buying power to negotiate better terms, but even as an independent it is worth picking up the phone and seeing what your suppliers can do for you.  Most people will want to help their customers as much as possible, especially to weather the tougher trading periods, so you are there to keep buying from them when things are more buoyant. 

 

3. Offer Multiple Payment Options: Traditional merchant credit accounts are a good way to win long term customer business, but more and more alternative payment methods, including credit cards, mobile payments, and online payment platforms give the customer flexibility on payments, and move the risk of the debt off your shoulders. If you are not directly servicing the debt for a customer it might be easier to offer them more attractive pricing on the products they are buying.  

 

4. Implement a Clear Invoicing and Collections Process: Have a well-defined invoicing process in place to ensure timely and accurate billing. Checking orders prior to invoicing reduces the need to raise credits against invoices.  Rectifying invoicing mistakes, like correcting prices is an unnecessary overhead, and if a pricing error goes in the customer's favour, they are unlikely to let you know, leading to lost revenue if it is not spotted.  Follow up on overdue payments promptly and consider offering incentives for early payment or charging late fees for late payments.  Use the automation in your trading and financials software to remind customers of invoices that are coming due, as well as chasing overdue payments.

 

5. Control Expenses: Review your expenses regularly and identify areas where you can cut costs. Look for opportunities to negotiate better deals with suppliers, reduce unnecessary expenses, and streamline your operations.  More and more business expenses are on a relatively fixed and regular commitment basis, with salaries, IT costs, insurance, utilities difficult to flex month-by-month.  However taking a bit of time to review expenses can be useful, to see if there are savings that could be made.  If you want to take a more aggressive approach to this there are consultants who can come and help give a more objective assessment on cost savings that could be made.

 

6. Improve Sales and Marketing Efforts: When the sales we are used to getting go quiet it is easy to sit back and blame external market forces, but there are things to try.  Review your sales history, firstly in the recent weeks to see what has been selling.  Are there product ranges that are still doing well?  Are there types of customer that are spending more than they used to, even if they weren't a key part of your sales previously?  Secondly most merchant businesses have a rich database of customers they have traded with previously.  Look at your inactive customers, those who have ordered in the last 6 months, but not the last 30 days, and dormant customers, who have ordered historically, but not in the last 6 months, and get your sales team to pick up the phone and see how they are doing.  

Focus on increasing sales by implementing effective marketing strategies. This can include targeted advertising, promotions, loyalty programs, and customer retention initiatives.  Use the trading statistics from your ERP system to identify the target products and customers who are most likely to get a response.  If you aren't experienced in delivering marketing campaigns find a marketing business who has a focus on marketing for merchants.  They will understand your business, and the requirements and language of your customers.

 

7. Manage Cash Flow Forecasting: Create a cash flow forecast to project your future cash inflows and outflows. This will help you anticipate any potential cash flow gaps and take proactive measures to address them.  Most financials software has some cash flow forecasting tools in, or if you really want to get smart there are tools that help build more dynamic forecasts, with multiple ‘what if’ scenarios.  We use Futrli (weird name, but good software), which uses data directly from our Xero financials.

 

8. Consider Financing Options: Explore financing options such as lines of credit, business loans, or invoice factoring to bridge any temporary cash flow gaps or fund growth opportunities. If you are offering a credit account  to your customers, consider invoice financing, which can keep the cash flow rolling into the business without having to wait 30/60+ days for the customer to pay, but such facilities have a cost that needs to be considered.

 

9. Build Strong Relationships with Customers: Cultivate strong relationships with your customers to encourage repeat business and prompt payment. Offering excellent customer service really makes a difference, because if business is tough for you, it is probably tough for your customers too.  We want to work with suppliers who have what we need, when we need it, don't make doing business with them hard work and can help us keep the costs under control as much as possible.  Regular communication, whether directly from your team, or automated from your ERP system can provide reassurance and keep customers coming back.

 

10. Seek Professional Advice: If you're struggling with cash flow management, consider seeking advice from a financial advisor or accountant who specializes in small businesses. I work with a Business Coach, and his insight and guidance both helps develop good opportunities and has helped steer away from some potentially costly choices.  It is tempting when business is tougher to dive into working on the operations, as the activity feels comfortable, but a good coach will help you focus on working on the business, rather than in the business.  These advisors can provide valuable insights and help you develop a tailored cash flow management strategy.