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4 simple steps to efficient company’s cashflow management.

4 simple steps to efficient company’s cashflow management.

The issue of cashflow management is essential to any company.  Despite this, 70% of all enterprises still encounter problems with cash flow, and every fifth claims that this is an ordinary rather than exceptional situation.  The main problem is that today you have to pay for the suppliers service with the money that a customer was supposed to transfer on your account yesterday, but an unexpected situation occurred and  money would appear at the end of the week.  Are you familiar with such situations?  I am sure, that you are.

Such situations and problems will always be there, that’s why everything depends on a set of actions that you have undertaken in advance.  These actions have one goal: to postpone the time of sending money as much as possible and, at the same time, to work hard to get money.

Today we would like to introduce 4 ways how to achieve the mentioned  goals:

 1. Calculate and forecast cash flow.

Forecast your cash flow for a year, a quarter, a month, and if you have a fast-growing business, do it even for a week.  Such scrupulousness will help you to be alert and if something happens, you will act quickly and solve a problem.  Also, you should be clearly aware of the fact that money will not always appear at the same speed, and creditworthiness will not expand endlessly.

How to start forecasting?

Check how much money you have now and then process to the collection of information.  Talk to salespeople, service representatives, bank and financial department employees, asking the “right” questions: How much money will appear in the form of payments?, What is the cost of maintenance?, Do we have “bad debts”? and so on.  Thus, you will collect all the information and will be able to build a high-quality forecast.

The next step is to create a detailed cash spending plan.  This means not only knowing when the liabilities will become due, but also what you will have to pay for. It is important to take into account all significant and minor costs: rent, inventory, salaries, taxes, benefits, equipment costs, professional fees, utilities, office supplies, debt payments, advertising, vehicle maintenance (service and fuel).

ABM Finance forecasting
ABM Finance forecasting


2. Build a smart system for receiving funds

If customers paid you money immediately after providing the services, you would never have problems with cash flow, but the probability of such an outcome is 0.01% and therefore you should  know and take a number of actions every day that will help you to get your money faster:

  • Offer a discount to customers who pay for services on time;
  • Ask a customer to make a prepayment at the time of the contract execution;
  • Check the creditworthiness of new customers;
  • Issue invoices immediately and track payments that are slow.
Chapter “Payment” in ABM Finance
Chapter “Payment” in ABM Finance


3. Manage your payments.

  • You have a task: to postpone fund payments  as much as possible.   How can it be achieved?
  • Take full advantage of loan repayment terms.  If the payment must be paid within 30 days, do not pay it earlier than in 15 days.
  • Use electronic funds transfer to make payments on the last day;
  • Keep contact with your suppliers so that they know datails about your financial situation.  If you ever need to postpone a payment, their trust and understanding will come in handy to you.
  • Consider carefully the offers of vendors for discounts on early payments. If you go deeper in situation, you may stumble upon “tricky” conditions.
  • Do not always focus on the lowest price when choosing suppliers.  Sometimes more flexible payment terms can improve your cash flow, rather than a bargain price.

4. Learn how to “survive” if  you run out of money.

Sooner or later you will encounter a situation when you need to pay your bills, but there is no free cash.  This does not mean that you are a bad manager, but only confirms the fact that no one can predict the future. So there are adequate modern practices that help survive the period of cash shortages competently.  The most important thing is to understand as soon as possible that the problem exists, and also:

  • Allow the banks to understand that you are a conscious client and know beforehand that you will need extra money;
  •  Open your own credit line in a bank;
  • Ask suppliers for a delay of payment,  they may  know your business, and sometimes they are even more interested in your financial stability than you are;
  • Get rid of unnecessary stocks, equipment, old products for any money that you are offered.

When using these tips, you can build a high-quality cash management system, but that’s not all. Nowadays, there are cloud programs for making up a payment calendar, as well as making a corporate treasury system automatic.

One of these programs is our ABM Cashflow system, which provides:

  • Transparent money management.  All payments are “in full view”;
  • Automatic control of key risks;
  • Timely fulfillment of  suppliers obligations;
  • Credit load reduction;
  • Managed liquidity;
  • Prompt and transparent reporting.

Do you want to automate your treasury system?  Leave a request, and we will contact you shortly.

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