Four tips to help businesses concentrate on cashflow – Business Leader

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Issue 37

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Story by
James Cook
August 11, 2022
In this guest article, Amanda Salt, Vice President, UK SME Sales, Global Commercial Services at American Express offers four tips to help businesses concentrate on cashflow.
Rising costs and supply chain pressures translate to challenging times ahead for business leaders. Yet research by American Express reveals a majority (67%) feel optimistic about the next six months and are developing strategies to mitigate any disruption to business as usual.
One way they’re doing this is by prioritising managing cashflow, which almost three-quarters (73%) of business leaders say has become more important over the last year as they look to protect their operation against rising costs. Any businesses looking to improve cashflow should consider their approach – here are 4 strategic steps to take:
As soon as you close a deal, you might be tempted to celebrate straight away. But the deal isn’t necessarily a success until such time your customer makes payment in a timely manner. Without it, you risk a cashflow shortage even if your business is profitable on paper.
Speed up payment terms by incentivising your customers to make their payments as fast as possible. For instance, you could offer a discount if they make payment within a week, or include a discount on future orders, gift certificates or merchandise.
While you speed up cash inflows, see what you can do to slow cash outflows. When an invoice comes in, check the terms to see how long you can delay payment. And don’t be afraid to negotiate – can vendors give you longer payment terms in exchange for your business? Could you qualify for a discount if you pay early? That gives you the opportunity to boost profit margins when cash is plentiful while buying more time when it isn’t.
With an American Express® Business Card, you get up to 54 days until payment is due, so there’s more time between paying suppliers and outstanding accounts – and your cashflow is maximised. Your business can remain interest and credit free, while giving you more wiggle room on your balance sheet.
Business expenses can sneak up on you: unused office space, built up inventory, along with costly employee spending. Individually, they might not be much, but together can be a serious drain on cashflow. Dedicating time to expense management, using a simple system like AmexExpense, can make a positive difference. In terms of employee spending, the app reduces time spent on reconciliation and can provide a range of insights, guiding any controls required to keep your business on track.
Every business needs a cashflow forecast. It will help you understand income and outgoings over a set period. That way, you know when you will have a surplus or a deficit of cash in your account, helping to plan your expenditure accordingly to ensure a consistently healthy cashflow.
Actively managing cashflow will ensure your business has the funding available to make payroll, cover bills, pay taxes – ultimately putting you on a much stronger footing when operating in a challenging economic environment.
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