Managing Cash Flow for Yourself, Business or Company

Cashflow is one of the most important concept for individuals and for businesses. If you're asset rich, but liquidity poor, then being unable to pay your bills or invoices could lead to a creditor taking you to court and this may force you declare bankruptcy if you haven't got the money to pay the creditor.

An interesting excerpt from Dun & Bradstreet Australia outlines how you can improve your cash position:

* Develop a cash flow projection and ensure you monitor and update it regularly
* Minimise bad debts through an established credit-assessment procedure
* Establish an accounts-payable policyat the outset of every credit
relationship
* Establish a deposit policy for work in progress
* Monitor
your customers' use of credit and adjust their credit limits accordingly
*
Closely manage your invoice process and collections practices
* Re-arrange
annual payments such as insurance so you pay small instalments frequently. This
will help smooth out lumps in your cash flow cycle
* Select an appropriate
source of funding for your requirements and pay the debt before the interest
kicks in
* Use short-term cash surpluses wisely. Don't keep them in accounts
that don't pay interest

I agree with all of the above, having utilised them in practice. The point about re-arranging your annual payments to pay by small regular, frequent instalments...that one I'm not quite a proponent of. If you can get discounts for paying the entire sum upfront annually, then this may be a more attractive option if your cash flow is reasonably liquid.

If you are struggling in terms of your own personal cash flow, then you need to review your budget and cut back unecessary expenses where possible. Contact creditors straight away to see what options they provide for clients experiencing hardships. Firstly by pre-empting the difficulty ahead, some creditors will be more lenient and offer you different payment terms, some will be informed and thus, not bill you for late fees and debt chasing fees.

For businesses, it's important to delay making early payment on accounts payable. For accounts receivable, it's important to follow up as soon as clients miss the payment date. The older the account, the less collectable it becomes.