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Business News 2009

Financial Fitness for Your Business

Fit businesses are the ones that will survive in 2009 and here we offer our top ten tips to keep your business in good shape to weather the ongoing economic storms.

1. Cash is the number one reason why businesses fail, so understanding the cash flow in and out of your business is vital for survival while regular cash flow projections – monitored and updated daily, if necessary – will help you to identify relevant indicators for how your business is performing.
2. Businesses also need to know where they are now, so updating bookkeeping records is a vital task. Producing monthly management accounts for comparison with forecasts will also provide early warning of future difficulties.
3. Keeping in regular contact with your bank and other creditors will give them a better understanding of your business and sector. Alerting them to potential difficulties at an early stage will also create more time to identify solutions.
4. Be creative when it comes to sourcing finance, such as invoice discounting or factoring as an alternative to an overdraft. With invoice discounting, a bank or finance company will advance money to a business against its invoices – usually 80 or 90 per cent of the value – to improve cash flow, while the business manages its own debtors. Factoring is a similar arrangement that includes a collections service to chase unpaid invoices.
5. Issue invoices regularly. One of the most common reasons for invoices not being paid is a query over the amount owed, so agree the invoice amount in advance if possible.
6. Make sure your customers are aware of your debt collection policy and that that your terms of business allow you to add interest to overdue accounts. If your terms set credit limits, stop supplying when these are reached.
7. Pursue outstanding debts, as customers will often pay the suppliers who are the most persistent.  Be prepared to threaten legal action if phone calls and letters fail to get results.
8. Cash is not the only form of remuneration. Share options or equity stakes are among the alternatives.
9. Think carefully about accepting every contract and consider how it will generate cash and add to your profits. Be wary of taking on non-profitable work that simply increases turnover.
10. Look at the bigger picture. Making time to look at how the businesses is performing, what you hope to achieve and how you plan to do so will give you a clearer focus for the way forward.

This article has been provided by UK200Group.