The following is a useful checklist to assess whether your business is applying a methodical approach to improving your cash flow.

1. Strictly enforce your terms of business

Your customers must sign up to your terms of business and you should develop a clear  procedure to handle the situation when payments become delinquent. Make it obvious in advance that delivery will be stopped as soon as the agreed credit limit is exceeded.

2. Clearly communicate your policies on credit to all staff

Put your policies in writing and circulate them to employees regularly. Selling to customers – even existing customers – unless their account and credit status have been checked should be taboo. Why waste time, incur expense and introduce risk by selling to those who have no intention or means of paying?

3. Prevent debtors compromising cash flow

A ‘gentleman’s agreement’ on an order is worthless without an official purchase order. What happens if the contact places an order without budget approval or leaves the company without safeguarding your interests?

4. Regularly review credit control procedures

Even small companies should make a specific individual responsible for credit control and ensure they have the right aptitude and training for the task.

5. Equip credit controllers with the right tools

Everyone involved in chasing credit should have good quality information and tools. For example, your credit control software should provide automatic prompts to show at a glance which customers need to be chased on any given day.

6. Automate to reduce costs and free resources

You can free time to resolve problems and build good relationships by automating time-consuming but essentially routine processes wherever possible.

7. Use ‘paperless’ technology

As well as reducing the costs associated with paper, invoicing by email sharpens your credit control. It provides a correspondence trail and invoices cannot get lost in the post. At the other end of the sales cycle, automating order processing will reduce overheads, increase your margins, and bring forward the date at which you can invoice.

8. Use eBanking to streamline and accelerate customers’ payments

Using BACS streamlines the process for all parties and provides more immediate feedback on payments.

9. Work in a way that frees up cash across the business

Rather than tying up cash in areas such as stock or overheads, adopt a ‘just-enough’ approach to optimising resources, so that you can fulfil your commitments profitably without leaving your business exposed.

10. Constantly monitor the cash position

Most financial software includes tried and tested formats for debtors’ reports and credit control ‘to-do’ tasks. Reports on receipts and payments will tell you what cash is due and whether it arrives by the specified dates.

11. Use cash flow as a business intelligence tool

Good cash control software can go further than tracking who owes you money. It can, for example, alert you via email or SMS text message if a particular customer limit has been exceeded and to other events that threaten your profitability.

12. Accurately forecast and manage cash flow

Given the importance of cash to the business, good cash flow forecasting can be a lifesaver. The objective should be to know what your cash position is right now, and what it is likely to be in six months’ time.

13. Take account of cash flow in managing individuals’ performance

Keeping on top of your cash flow forecast will not only help you to maintain a watchful eye on the cash position, but also give you a clearer picture of the cash drivers within your business. Consider building the improvement of cash flow into your performance management process, rather than basing rewards purely on revenue and profit targets.