The end of the year is a great time to take stock of your accomplishments and set targets for the future. Including an annual business check-up as part of this evaluation can help you find efficiencies that may provide you with extra time and improved cash flow.
You’ll need to analyze your current operations using some of the best practice strategies for your operations. Here are some of the areas where you may find efficiencies.
Billing and collections
Wherever possible (should competition permit) consider reducing your payment terms to as short a period as possible. Perhaps you can switch to 15 days instead of 30. Or even better, switch to due upon receipt.
Other ways to improve cash flow include:
- Think about offering a discount (one or two per cent) to encourage early payment
- Consider offering incentives to collection staff
- Mail invoices on the same day they’re produced, or better still, move to electronic billing wherever possible
Find efficiencies around your inventory by:
- Looking for ways to tighten inventory management
- Asking your suppliers for discounts, for example, volume discounts for bulk purchases or long-term arrangements
- Moving towards just-in-time purchases where possible to maximize available cash
Banking and financial management
Tighten up the financial management of your business by:
- Paying suppliers using a business credit card and taking advantage of the interest-free grace period
- Earning interest on any excess cash available through a short-term investment account
- Using any spare money to pay down your line of credit
For more tailored advice on preparing your business for the new year, remember to reconnect with your Scotiabank Small Business advisor.
Before you take action on any of the information above, we recommend consulting with a qualified business advisor that understands your unique needs and situation for your specific business and/or personal plans.