Following from our previous article on healthy cash flow, here are seven more tips and tricks to keep your cash flow flowing.
1. “If you fail to plan, plan to fail”
An unplanned invoice can lead to you going under. It doesn’t matter how good your finances are looking at the moment – if you don’t have the cash to pay your bills, you won’t survive. So whether you use a pen and paper, Excel or accounting tools, get planning and forecast your cash flow for the short and medium term, updating your forecasts regularly.
2. Offer direct debits
This is one of the quickest ways of boosting your cash flow and is helpful to everyone. With a direct debit, you will get your cash more quickly, your customers don’t have to worry about the administrative burden, and everyone is better protected from fraud.
Again, this is not relevant to ALL ecommerce websites, but for those that have regular customers, it’s a good trick which will also help your financial planning, as you know exactly when each customer’s direct debit will hit your account.
3. Clear that excess stock
Many ecommerce businesses hold too much stock or, to put it another way, have too much money tied up in stock. Clear out old and slow-moving stock if the cash generated could be put to better use.
4. Cut out excess VAT
VAT is one of the biggest regular outflows of most businesses, so it’s worth looking at how VAT efficient you are. Under standard VAT accounting, you must complete four VAT returns a year – any VAT due is payable quarterly.
But if you’ve got an estimated VAT-taxable turnover of less than £1.35m, consider signing up to HMRC’s Annual Accounting Scheme for VAT. This allows you to spread VAT payments evenly over nine months, with a balancing payment or refund at the end of the year, helping you to avoid large cash flow fluctuations.
5. Renegotiate with your suppliers
Make sure you regularly review all of your prices with your suppliers. A lot of businesses don’t do this, but it can be a great way of reducing overheads and freeing up cash, especially if you haven’t asked your supplier to review their prices in a while.
6. Request extended credit terms
Ask your suppliers for extended credit terms, which will keep your cash in the bank for longer. If you’re a loyal customer and have always paid your invoices on time, then your supplier should oblige if they want to keep your business.
7. Check your product mix
Again, know what is selling well. Are some of your products just sitting around for months, waiting to be bought? If yes, you might not be offering the right mix of products on your site. Instead of focusing on products that create the highest margins, consider faster-moving lines, which don’t tie up your cash flow for very long.
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