12/06/2015

By Jayne Archbold, CEO of Sage Enterprise Market Europe & Chair Sage ERP X3 Globally

With the economy on the upswing, many business owners are thinking about how they can capitalise on this opportunity and grow their businesses. While some businesses may be contemplating opening a new location, hiring, or upgrading an outdated POS system to take advantage of the economic uptick, freeing up cash to pay for these new opportunities isn’t as easy as identifying the need for them. And while all of these plans require capital, there’s no reason to panic—here are three simple strategies to help free up some much-needed cash and grow your business.

Make sure you have a strong receivables policy and entertain a cash management strategy.

One of the easiest ways to free up cash is to start with your receivables. Make sure you are getting paid on the due date—not before and not after. First, identify your late paying customers and then create a strategy to incentivise them to pay faster. A common tactic for improving cash flow in a hurry is to negotiate price discounts in exchange for faster payment terms. Such tactics can sacrifice profit in the short-term, but provide for an immediate boost in liquidity. As you sign new customers, consider negotiating revised payment terms. You should also consider accepting alternative forms of payment. Making it easy for your customers to pay on time just might solve any late payment issues and shorten your cash conversion cycle. Businesses of all sizes benefit from a shortened cash conversion cycle so remember to review your receivables policy on a regular basis and make sure it is working for your business.

When your receivables are under control, it is easier to manage cash flow, budgets and purchase additional equipment. In addition, larger enterprises can work with their financial institutions to consider cash management services, which allow businesses to earn higher returns on deposits, enabling your money to work for you!

Assess your business management solutions and act accordingly.

First, give a thorough and honest review of your enterprise’s business management systems, such as inventory monitoring and existing ERP systems. After this review, ask yourself, do I have an accurate snapshot of financials, inventory, and other key business performance indicators at my fingertips? Are all of the systems working together to empower you with the information you need to make informed decisions? If your answer to these questions is no, you have a problem on your hands. You should look for an integrated solution that will give you information on inventory coming in versus resources that are going out. Loosely integrated management tools can lead to discrepancies that may prove detrimental to your bottom line and cloud decisions when it comes knowing exactly where cash is available.

Research the cloud.

An integrated business management system is one of the most important IT decisions that can be made, but one that will provide the quickest return on investment. Before you become concerned about the capital you will need to purchase this new system, educate yourself on the easy-to-implement, cloud-based business management solutions that are available through subscription, thus making up-front costs minimal.

Taking a hard look at your receivables and implementing a new business management system may sound daunting, but the benefits will be substantial. With this system, you may find missing or excess inventory that can be turned into much needed cash. Or your new system could prove to be so efficient that you don’t need all of the staff you once did. With a little effort, freeing up capital to finance your growth plan is entirely possible and major changes are not always required. By analysing these fundamental aspects of your business, you may have identified everything you need to free up capital and achieve the growth you’ve envisioned.