Posted on: 27 January 2015

Powwownow is Europe’s fastest growing free conference call provider. So they know more than a thing or two about successfully managing their cash flow.

Recently Premierline caught up with their Financial Director, Andrew Johnson, who shared his three top tips for keeping control of the cash.

1. Minimise your debtor day

Every business experiences a gap between invoicing and payment. The key is to minimise these gaps and ensure it remains stable. One way to do this is to establish direct debit as a business norm for collecting receipts, allowing a business to scale up without increasing costs required to collect the debt, whilst also providing a stable inflow of cash from which to make payments.

If you experience resistance to direct debit from your customers, you should take time to understand their reasons, as there will probably be a counter argument to put their mind at ease. Many people don’t know that once a direct debit payment has been made, the payee can quickly and easily have the money returned by contacting their bank. With this in mind, businesses should only use this direct debit for small value, high volume transactions.

2. Set cash flow targets

Setting targets is an excellent way to ensure the cash flow is given the attention necessary and provides a level of satisfaction and ownership to hit and achieve these targets.

To work as a motivator, you must be able to give up-to-date understanding of performance versus target. One way to do this is to prepare and maintain a cash flow forecast that is updated weekly – this provides an accurate outlook for the next 6-12 months.

3. Stagger payments

Whilst it may seem more efficient to spend an evening a week or month making all the necessary payments to creditors, this puts spikes of strain on your cash flow. If you do not have good visibility of what cash will be coming in or going out of your bank accounts in the following days, you may end up paying unexpected bank charges or even having to apply for an expensive short term loan.

Instead, set up staggered Direct Debits where possible and try to coincide them with when you know money will be coming in. Time payments such as VAT and other taxes to days when you know the money is there. If you have arranged flexible payment terms with any other creditors, regularly have open dialogue with them so that you honour your agreement whilst paying when you can afford it.

Andrew Johnson is Finance Director at Powwownow. He is a chartered accountant and has a degree in accounting and finance.


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