Thursday, 18 January 2018

Information and commentary for the small business banking industry

Be the bank business owners see as the cash flow experts

Cash flow is king

Small businesses exist to make money. But they won’t be as profitable as they can be if the business owners aren’t managing their cash flow effectively.

Most first-time business owners will, at some point, need some help managing and improving their cash flow. And if their bank is on hand to provide that assistance, so much the better – if problems can be resolved, it’s a win-win situation.

It might not be a first-time business owner either – banks are also likely to be approached by those experience in business who’ve completed a cash flow forecast and have realised they’re going to need the bank’s assistance.

This blog, however, is aimed at providing some handy tips for helping inexperienced business owners manage their cash flow.

Cash flow management – the basics

One of the first things to check is if people understand their cash cycles. If they don’t have a grip on the ebb and flow of cash in and out of their business, then Job #1 is to help them understand how their cash flow cycle works. In fact, you might be surprised at how much someone’s cash flow improves just by helping them get to grips with it.

Novice business owners can benefit from getting assistance with:

  • Shortening their cash cycles – help them to reduce the periods of time their business is going without cash, such as using immediate payment solutions and encouraging early payment.
  • Reassessing costs – get them to look at ways of reducing their costs, without making assumptions. Help them to be as accurate as possible.
  • Reassessing pricing – are they not charging enough? Help them to understand that raising their prices isn’t as scary as it sounds.
  • Managing debt – work with them to streamline their budget so that they can pay their creditors more easily. Including their bank! On the flipside, assist them with any debts they’re having problems chasing up.
  • Test – always make sure your CTA is working across all the platforms it’s intended for. Get people on different computers and mobile devices to click on it and report any problems.

Cash flow forecasting

If they’ve never performed a cash-flow forecast before, sit them down and help them with their first attempt. If you’ve got relevant tools and calculators on your website that can facilitate a forecast, point them in that direction.

Help them to understand that a being able to forecast cash flow accurately is one of the most effective ways to manage their cash flow, and is an essential business skill.

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