Subscribe Blog

Jun 04

The second cause of poor cashflow

Posted by James Burn on Tuesday, June 04, 2019

The second cause of poor cashflow - Your accounts payable process

The second cause of poor cashflow relates to when and how money is spent in your business, including your terms of trade with suppliers.

 

Do you have spending budgets in place?

 

It’s best practice to prepare a budget every year, usually before the start of a new financial year. It’s also best practice to make sure that team members who have authority to purchase products or service are doing so within an agreed budget, and that controls are in place to ensure that spending budgets are not exceeded.

 

Now is a good time to review (and document) your accounts payable process, from ordering right through to making payment.

 

When was the last time you reviewed your suppliers’ terms of trade and prices?

 

Terms such as payment expectations, discounts for early payment, late payment implications, insurance, and warranties are all worthy of a closer look. What controls are in place to ensure supplier payments are made on time and discounts for prompt payment are maximised?

 

Have you recently evaluated the pricing of your current suppliers and compared this with competitors’ prices? Your evaluation should include delivery charges, payment terms, and discounts.

 

There are many more strategies you can employ to minimise the risk of fraud and human error.

 

Talk to us about your plans to maximise cashflow. We can help you to distil your goals and ideas into a concise, simple plan that will keep you focused on what’s important.