Cash flow management should be a priority for leadership teams: Mel Hird

Improving cash flow is crucial for a company’s financial health and sustainability. Focusing on key areas of the business will aid the company’s future and make it more investable.

It’s essential to ensure that your company has efficient and effective invoicing and collections processes in place.

Monitor accounts receivable ageing reports to identify overdue payments and take prompt action to collect outstanding debts.

Also, consider offering discounts for early payments to incentivise customers to pay quickly.

Review and analyse all operating expenses to identify areas where costs can be reduced without negatively impacting core operations.

Quickly implement cost-cutting measures such as renegotiating contracts, optimising inventory management, and eliminating unnecessary expenditures.

While these can often prove unpopular, the health of the company is more important in the long term.

Carefully manage inventory levels to avoid overstocking, which ties up capital, or understocking, which can lead to lost sales. Extend supplier payment terms when possible while maintaining strong vendor relationships.

Optimise the management of cash and short-term investments to maximise returns.

Focus on strategies to increase sales and revenue, such as expanding your customer base, entering new markets, or introducing new products or services.

Conduct regular sales forecasting and budgeting to ensure your revenue projections are realistic and achievable.

Marketing can often be one of the first budgets to be cut, and this can often be a critical mistake that will open the door to competitors to take market share.

Review your existing debt structure and explore opportunities to refinance or consolidate debt to reduce interest expenses.

Consider negotiating with lenders for more favourable terms or seeking additional funding sources, such as lines of credit or equity investments, if necessary.

If you need to secure new funding, consider using a professional advisor, who brings knowledge and expertise to navigating the complex world of finance and funding options. They can provide valuable insights, guidance, and strategies tailored to your specific funding needs.

The Fresh Thinking Advisory team also brings an extensive network of established relationships with lenders, investors, and financial institutions and will leverage this network to connect clients with potential sources of funding that they might not have access to otherwise.

It’s important to note that improving cash flow is an ongoing process that requires vigilance and regular analysis of your company’s financial statements. CEOs should also collaborate with their finance teams to develop a comprehensive cash flow management strategy tailored to their specific industry and business circumstances.

Additionally, seeking advice from financial experts or consultants can be valuable in identifying and implementing effective cash flow improvement strategies.

Ultimately, focusing on cash flow management will give the company headroom to address growth positively. It can feel like a negative period to management teams, but it’s an investment of time and energy that will pay dividends in the long run.

Mel Hird is a director and founder of Fresh Thinking Capital.