FINANCE
BY LYN NEWBURY , DIRECTOR OF AUDIT & ASSURANCE , AZETS , ASHFORD
Cash - The Greatest Source of Funding of Them All
AS WE EMERGE FROM ONE OF THE MOST CHALLENGING AND TESTING PERIODS IN A GENERATION , MANY BUSINESSES HAVE STRUGGLED TO SURVIVE . AS WE BEGIN TO READJUST TO ONCE FAMILIAR ALBEIT NOW SLIGHTLY FLEXED WAYS OF WORKING , BUSINESSES MUST REFOCUS ON GROWTH AND EXPANSION . SUCH BUSINESSES REQUIRE FRESH INJECTIONS OF FUNDING AND CAPITAL TO FACILITATE THAT GROWTH . THE GREATEST SOURCE OF FUNDING OF THEM ALL , HOWEVER , IS THE CASH GENERATED BY THE BUSINESS .
SIX CRITICAL WAYS TO TAP INTO THE GREATEST SOURCE OF FUNDING
1 . Issue your sales invoices promptly
As soon as the work has been completed , or the service provided , issue a sales invoice promptly – ideally electronically . Ensure all invoices follow a template . Double-check it is accurate , as errors can lead to delays in settlement . Ensure your customer data is up to date , to help collect the cash quickly .
2 . Communicate payment terms clearly
Clearly setting out expectations , in terms of payment , will limit disputes and delays . Set out your terms and conditions in a letter of engagement for your customers to sign . Include the terms and conditions on your invoices and other documents . Be clear about what is being provided , the cost , project timeline , when payment is due , and what happens if payment is late .
3 . Have a strong credit control function with robust procedures and protocols
Employ a credit controller who uses the latest technologies to improve the credit control process , will chase every overdue payment , put poor payers on a stop list and won ’ t be afraid to outsource tricky debts to a collection agency . Good credit control helps you to get paid quicker so you can pay your own suppliers quicker , avoid late payment charges , increase your credit rating , and provide you with cash to invest in the business .
4 . Develop strong relationships with your customers and suppliers
A good credit controller will forge strong relationships – a little rapport with those who pay goes a long way . Knowing the best people to contact is hugely important . They won ’ t be afraid to push your invoice to the top of the list .
5 . Make sure your business and underlying transactions are profitable
The fundamental building block in cash generation is profit . If your underlying transactions are profitable , then with the right credit control , these transactions will generate cash and working capital . Unprofitable transactions will withdraw working capital from your business . Use the latest cloud-based accounting solutions to manage and report your transactions and financial performance to help you ensure profitability . Seamlessly sync this data with the latest cloud-based cash flow tools to ensure that this profitable performance generates cash .
6 . Structure your tax affairs effectively
Several tax incentives , structures and reliefs exist to ensure you are not paying unnecessary amounts of tax . Smart , strategic tax planning
helps ensure you are minimising the tax take on the profits and cash you are generating . Tax can be complicated – speak to a trusted business advisor to ensure you remain compliant whilst maximising the positive effect of the cash generated .
Our trusted business advisors help SMEs grow and expand by implementing cash generative strategies and harness the latest cloud and accounting solutions . Speak to your local Azets business advisor or email lyn . newbury @ azets . co . uk to find out more .
Local offices : Ashford : 01233 629 255 / Canterbury : 01227 454 861 Maidstone : 01622 690 666 / Orpington : 01689 827 505 Sandwich : 01304 249 997
Accounting | Tax | Audit | Advisory | Technology www . azets . co . uk
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