Top Ways to Mind the Cash in Tough Times
Btb Guest Author
Garrett Cronin
Don’t incur the expenditure unless absolutely necessary – mind every euro as if it was your last
Payment side
• Ensure you are purchasing at the best deal you can get through hard negotiation. If you can’t get a better price, get better terms
• Ensure you get appropriate discount for early payment
• Only pay on the due date and not before
• Review contracts to ensure you only pay for what you want/get
• Re-tender supplier contracts on a regular basis
• Aim to reduce the number of suppliers to leverage spend and prices
Debtor side
• Issue invoice straight away and ensure it is correct
• Link any bonus to cash collection
• Have the sales person do the collecting of cash
• Review credit limits on a regular basis and reset based on current, not past, levels of business
• Implement strict early payment discounts
• As soon as credit period elapses have a regimented debt collection procedure in place
• Initiate credit collection procedures before invoices become due
• Trust your gut feel – sometimes it might be better to take less than 100% to get the cash rather than wait and/or never get the amount owed or go through expensive litigation
Stocks
• Don’t order more unless absolutely necessary
• Enter all stock on your system as soon as it is received to ensure full transparency
• Identify slow moving stock and repack, re-price, re-use to generate cash
• Renegotiate lead times from suppliers and reset minimum stock levels and order levels accordingly
• Negotiate consignment stock from suppliers
• Introduce/modify approval levels for stock purchases
• Discontinue slow moving / loss making product ranges
• Ensure ownership and accountability exists for every item of stock (ie sales or product managers)
VAT
• Ensure you include any VAT re bad debts written off in your VAT return
• Process supplier invoices as soon as they are received/issued
• Consider timing of invoice issue at month end to optimise credit on VAT return
Other
• Revisit treasury strategy – reduce number of bank accounts and consolidate with your banking partner
• Sweep cash daily and manage funds, currency and relationships, centrally
• Limit spend authority of staff
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Garrett Cronin is a Partner in the Advisory practice at PricewaterhouseCoopers, and specialises in the area of Performance Improvement. Garrett leads the Finance and Operations Effectiveness Teams, providing advice on sustainable cost reduction, shared services, outsourcing, programme and change management, working capital management and corporate performance management. He also leads the PwC European Shared Services Network supporting clients internationally with advice and insights on best practice. He hosts PwC Ireland’s CFO Network Forum, which meets a number of times each year to discuss and share insights into those issues challenging CFO’s today. Garrett is a Fellow of the Institute of Chartered Accountants in Ireland.
Tags: business expenditure, early payment discounts, Garrett Cronin, managing stock levels, negotiating with suppliers, Operations Effectiveness, ordering stock, PriceWaterhouseCoopers, treasury strategy