Met your sales forecast but still no money in the bank?
So you’ve met your sales targets but are underwhelmed by the amount of cash in the bank? Here are five tips to help you convert sales into cash.
Chase unpaid invoices
You may think that it’s okay to have overdue customer invoices, because they’ll eventually pay, right? Wrong. When you allow customers to pay on their own terms you are effectively providing them an interest free loan. A loan of cash that could be in your pocket.
So you can see why it’s vital that someone in your business actively manages accounts receivable and regularly follows up late payers.
Take advantage of online tools
Debt collection is it not always the most fun task, and for that reason often falls to the bottom of your to do list. However, technology is improving and there are some great features available in most accounting packages, including:
- Send automated invoice reminders
- Schedule monthly statements
- Offer easy ways to pay via online payment portals
Train your Customers
We all have customers who take forever to pay, who you spend valuable time chasing for payment; time that you could spend on more important areas of your business. If you don’t actively train these customers to be better payers, they will continue to take advantage of your cash flow.
It may be an idea to only provide goods or services if they pay on order, rather than via your usual terms. You may even find that these customers are not worth having and you’d be better off selling your stock to a more reliable customer who will pay you within terms.
Evaluate stock on hand
It might be comforting to have excess stock just in case someone wants to buy it. But you need to remember that stock has a value and when it’s sitting on your shelf that value may be diminishing and could even become obsolescent. For this reason it’s vital to keep a close eye on your stock and ensure you’re not tying up your cash in stock that may not get sold. Consider if there is opportunity for consignment stock or just in time ordering.
Think outside the stock
Perhaps your suppliers offer you volume discounts. Is the 5% saving for purchasing in bulk worth it if your cash is tied up in stock? There’s the possibility you will purchase too much and have to discount it to get the stock moving. Sales are important to build customer relationships but if a sale is needed because you purchased too much of one item, then it is vital you review your stock ordering process. Marking down stock by 50% means you have said goodbye to 50% of the revenue (and in turn cash).
Of course there can be other reasons why your sales forecasts haven’t turned into cash on hand. At Accru Melbourne, we have a strong understanding of running a business and can provide expert advice to managing your business. Contact our Business Advisory Specialists on (03) 9835 8200 or alternatively fill in your details below and we will be in touch.