Tool Box
Issue No. 49 - October/November 2009
Spring cleaning cash flow and debt
by Chris Gebhardt
Eliminating risk from business relationships and ensuring cash flow remains steady is critical for riding out the tough times and preparing for the good times, according to financial advisory firm, William Buck.
With signs of an economic recovery on the horizon, Business Advisory Director, Chris Gebhardt says it’s a great time for businesses to spring clean debts and shore up terms of trade with customers.
“There are some common mistakes made by businesses when it comes to managing cash flow and debt that can be easily avoided by putting good systems in place and following them,” Chris says.
“Not setting a credit limit for each customer, allowing customers to get to 90+ days before acting, allowing additional credit when a customer is already outside of their terms of trade and lack of communication regarding fee-price disputes are all common mistakes that can be managed.
“A good starting point is to establish credit application processes and terms of trade with customers.
“It is good practice to have these processes in place in good and bad times, and they should be managed professionally through an accountant or lawyer to ensure you have proper legal documents in place.”
1. Require a credit application
This will allow a business to increase awareness of who they are dealing with and to do a credit check on new customers based on the customer’s credit history. It will prompt the business to think about setting cre...
