Well, the word now is not that “cash is king” but that now “cash is the whole royal family!”.  Cash is crucial to keeping any business running; your cash tightens up and you may as well have severed your carotid artery.


So, here are 21 really practical and down to earth tips for businesses to keep their cash flowing:

  1. Invoice immediately or frequently.

    If you do larger projects, be sure to invoice in instalments (progress claims) but otherwise invoice immediately after the job, or at least weekly.   You need to invoice to get paid.

  1. Make it easy for a client to pay.

    Include your bank details on the invoice and have various options for payment, ie direct, BPAY, Credit Card or cheque.

  1. Debt collect every week.

    Yep – weekly!   Have a system, a schedule and keep notes.  When someone makes a promise but fails to fulfil, follow up as you should have noted all promises and when they were made.  Remember the adage “the squeaky wheel gets the grease”.   Squeak heaps and get those payments in quicker.  It’s a statistical fact that the longer you let an account go unpaid, the more likelihood of you not being paid – at all.

  1. Know your margins and your cycles.

    And of course, keep your bookkeeping up to date.  A sale may mean income (in the books) but reality is that it’s when the client pays that’s critical.  If your average collection days are say 70 and you are buying lots of stock, which has to be paid in 30 days, you are carrying a lot.  Try to close the gap.  If you can buy on credit, 30 days from end of month, buy early in the month, so you essentially get up to 60 days.  Cut the debtors from 70 to 50 days and you’ll be ahead.

  1. Keep stock purchases to a minimum – don’t carry any more stuck than necessary.

    Of course you have to have stock to keep the business going, but know what moves and what does not.  For example, I am a MYOB software re-seller.  Some levels sell heaps and I stock these, but other levels (the very high levels) move slowly so I only order these in on a needs-only basis.

  1. Have client/customer agreements and be sure to cover aspects such as interest or fees you charge on late payment.

    Remember you are not a free bank for your customers; if you owe the ATO money, they have a GIC (general interest charge) why shouldn’t you?

  1. Get customers/clients to pay deposits on work.

    Especially if you have stock. It’s quite common for high stock items (such as cabinet makers) to ask for a 30% deposit.

  1. Don’t release work till you are paid.

    Many service orientated businesses, will not release work (ie Accountants with clients tax returns) until they are paid, or at least the old account is settled.

  1. If you have a client who has a bad history of payment or looks to be going bankrupt, then definitely work on a pre-payment system.

    With a bad history, it’s very fair to ask for repayment in order to keep doing their work.

  1. Consider “sacking” the “D” grade clients.

    If they are hard work, always unjustly complain and then don’t pay – you don’t want them.    Move them out to make room for a new “A” grade client.

  1. Look after you’re “A” and “B” grade clients.

    These are great clients and you value them, so be sure to look after them and not put so much emphasis on gaining new clients that you neglect the old.  Find at least one thing you can value add to these clients (perhaps a free report, or additional free service) to show thanks for their custom.

  1. If you have a new client who has no history with you, again work on pre-payment system for 3-6 months.

    Be polite way and explain it’s standard Corporate Policy – most (especially if they have good payment intentions) will understand and be ok.

  1. Don’t discount.

    Look at a “discounting table” on the internet – it really can be scary.  You will see for example that if you gross profit margin is say 15% and you discount by a tiny 5%, then you actually have to double your sales volume to achieve the same gross profit.

  1. Ask suppliers for early payment discounts.

    Although you know discounting isn’t good, doesn’t mean you can’t ask your suppliers for discounts if you pay early.  They may decide that having the payment early is worth giving out the discount.

  1. Watch your expenses.

    Ensure you are not paying a fortune in phone services, or bank fees, but don’t be silly about it.  Remember you “need to spend money to make money”.  Don’t cut costs on things like marketing and advertising and these costs are really investments in your business and critical to its good health.

  1. Ensure your marketing/advertising is working.

    Above I said to not cut costs, but be sure you spend well.  Track your leads.  Ask every new enquiry how they heard from you and write it down.  If you spend money on an advert that generates zero enquiry, then it’s close to wasted money.

  1. Review/revamp your website.

    We are in the age of technology and most people search via the internet.  When did you last review your web site?  Or gosh, do you even have one?   For most businesses, an effective website can really generate a lot of work.  Use it.

  1. Have a good accountant.

    This will help (legally) with tax liabilities and possibly reduce the need for instalment, and thus free your cash up further.

  1. See your solicitor or accountant re your entity setup.

    Not only is the setup critical for asset protection, but quite often you can (legally) pay less tax with the correct setup.  For example, why pay individual tax at 46.5%, rather than corporate tax at 30%?

  1. Have a mentor or business coach.

    Often (especially those of us in small business) we benefit from advise from a coach or mentor.  Maybe we just need someone to keep us focussed and on track, or to ask curly questions.  Don’t forget your accountant here too – a good one will help your business with more than just tax return prep.

  1. Educate yourself.

    Read articles on business subjects, attend seminars and gain knowledge. Sometimes it’s not about learning something new, but refreshing ourselves with reminders on what we should be doing – and then do it.