Looking for ways to improve the cash flow of your not-for-profit? Our team at Carbon Advisory have shared a few things you can implement for better cash flow management.
The start of a new year always presents a great opportunity to sit down and plan how you are going to improve your business in the 12 months ahead. One area where there is often room for improvement is cash flow. Our team at Carbon Advisory
have identified their top five tips for improving your cash flow in 2019.
Prepare a cash flow forecast
Too many businesses and not-for-profits look at the profit or loss each month or quarter but very few have a cash flow forecast to review. A cash flow forecast will assist to understand how much is available for the purchase of new equipment or employ new staff if required. A cash flow forecast will assist in understanding whether there may be a cyclical issue where cash may be a challenge in the current month but in the following month will improve. This document will assist in being preemptive to issues which may arise and going to a bank or financier ahead of time will be far better than waiting for the issues to occur and then being forced to rush around looking for a bank.
Reward staff who factor the collection of cash as a priority
A lot of employees don’t consider cashflow as a priority. Employees that do factor that into their daily working lives could be rewarded for their efforts. Some possible ways to reward employees include:
- Providing bonuses only when the cash associated with sales is collected by the business;
- In a retail environment, reward employees on upselling drinks or other low-value/high-margin products;
- For a not-for-profits, reward staff with a bonus on the collection of funding such as running an event and paying a bonus on donations/sponsorships received on the night;
- Consider bonuses based on improving average debtor days which is a metric for showing how quickly your business or not-for-profit collects money they are owed (talk to Carbon Advisory if you need help calculating this metric!).
Seek government assistance
There have been numerous discussions with respect to Government incentives. Some examples are the creation of a new grant products which are designed to help provide businesses funding to pursue growth strategies, or the research and development tax incentive which provides help to businesses who are looking to try new things.
Move to a just in time inventory management system
In order to conserve cash on operations the movement to a just in time inventory model can be beneficial. Only ordering stock that you intend on selling and converting to cash relatively quickly is very effective in making sure the least amount of cash is ties up in stock sitting on the shelf awaiting to be sold. While you may get discounts for larger quantities it is important to weigh up this discount with the amount of cash that will not be able to be used for continuing to grow your business or paying bills.
Although the start of a new year is an ideal time to review your cash flow situation and implement ways of improving it, you should be reviewing it throughout the year introducing new ways to improve it regularly. For more tips on better cash flow management, chat to our team at Carbon Advisory.
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