Cash is king in business. Without it you can’t pay your bills or reward yourself for your efforts. We can sometimes get caught in the trap where the only way to get money is to sell more or see the bank manager to increase the overdraft limit, when in actual fact there may be funds available to you in places you haven’t yet looked.

Getting your debtors to pay on time is one of the quickest ways to provide your business with additional cash funds. Regular follow-up phone calls on overdue accounts, appropriate to you business, are also essential to achieve timely payment. End each phone call with a conclusion: who will do what, and when. Effective credit management requires a systematic, escalating approach, including use of a diary system, debtor’s notes and potentially a credit collection agency.

Have you ever been called by a supplier because you missed the invoice payment deadline again? It might be time to discuss the possibility of extended terms with your suppliers. Be realistic about the timeframes in which you feel it would be possible for your business to make the payment. A supplier might consider extended terms in return for certainty of payment.

If you have a creditor through whom you put a large quantity of business, or have exclusive supply rights to you, they may be open to instalment arrangements on your account with them. Rather than pay invoices in one lump sum, they could be cleared over a series of weeks or months in agreed instalments.

Most credit cards will provide you with at least 50 days free credit, as long as you pay off the balance each month. As long as you manage your bank accounts well, this can reduce your interest costs as well as providing a source of additional working capital.

If you are in overdraft or paying interest on funds obtained to enable you to buy stock, then that stock is getting more expensive, consequently reducing your margins every day that it sits there as the interest cost increases. Effective stock management will reduce the working capital you have tied up in inventory, releasing funds for use elsewhere.

If your business is asset intensive and has significant funds invested in capital assets, then a leasing arrangement may be a viable option for you.

There are finance companies that are willing to buy your assets off you and lease them back to you, either as a finance or operating lease. This can free up the funds that you have tied to the assets.

The most important aspect of freeing up funds that are effectively already in your business is to ensure sustainability of your financial position. Sensible businesses require sensible use of resources. Are you utilising your resources effectively?

For more details on effective funds management, or to review your present financing activities click here