As a business person your main concentration is focused on improving your business and improving your cash-flow. There are so many blogs on the subject of cash-flow. Let me be different and give you a functional model on how to improve your cash-flow.
In a business there are three major functions: Sales, Operations and Purchases. Let us do reverse engineering and start with the sales function, meander our way through operations and arrive at the purchases.
Sales
1. Look at your sales model; you have cash sales which is now becoming something rare due to recession. In cash-sales you raise invoice, receive cash and deliver goods and that is all over. As a matter of prudence, you should give incentives to your customers who pay by cash. Customers would give currency, bank cheque or credit card. If the sales are on credit card it is the same process but the merchant who services your credit card takes out a portion of your sales income. You should negotiate with your merchant better terms for you. Whatever the form cash-sales help improving your cash-flow tremendously
2. A credit sale is a different ball game; you part with the goods but the payment is received after a lag of time. Here you have to control the following areas to improve your cash-flow:
2.1 Never overtrade with a single customer; broaden your customer base
2.2 Do not stick to uniform credit terms; be flexible in extending period of credit depending on the customers and situations
2.3 As you deliver goods see the bill/invoice is also delivered; for large amount insist on acknowledgement
2.4 Segment your customers into: fast payers, prompt payers, slow payers and non-payers. Always offer rewards to those who pay well before the due date or promptly on due date. As regards to the slow payers send them reminders at-least couple of weeks before due-date and keep on chasing after the due date. You should not deal with the non-payers except in getting your money back
Operations
Operational expenses can take two forms: internal and external; internal relates to payment of salaries, wages etc. while external covers areas such as utility and other bought-in services. Follow the guidelines to ensure healthy relationship with staff and expense creditors:
1. Pay employee salary and wages on the dot
2. Pay external bills only on the due date; never pay before it falls due
3. Get whatever discount you can have on prompt payment of the external expense bills
Purchases
Like in sales purchase is a critical area where your money is tied down. Ensure the following in improving your cash-flow:
1. Plan your purchase function very well; time of purchase and level of purchase should correspond to smooth functioning of your production/process department. Over-stocking is as bad as non-availability of input goods as and when required. Institute good inventory management system and ensure that no waste, theft or leakages take place
2. Negotiate best terms of your purchases in price, delivery and related matters
3. Monitor payables so that you are never behind payment
4. And you must make payment only on the date due or just prior to the due date in case of holidays etc..
Cosmics
In addition to the above three major functions, cosmics should also be taken into considerations. The above three are mechanical and business like functions. Cosmics, on the other hand, work internally and outside the realm of mechanics. You must make your office bathing in cosmic energy. There are several measures that you can take to harness cosmic power; one easy way is that you can keep gems & crystals to get that extra zing. Some of the gems & crystal recommended include: Garnets in several hues: chiefly red, orange, yellow, pink and violet; green coloured Aventurine, Calcite and Tourmaline.
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