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What are your best tips for monitoring and improving cash flow management?

As a small business, I find myself running into cash flow problems sometimes. What can I do to minimise these?
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Expert’s Take

Gregory Totter
Head of Cash Management, Global Transaction Banking, OCBC Bank

Cashflow management is important as it allows companies to focus on long-term business plans while having the ability to ride on short-term market opportunities and trends. Effective cashflow management, on a day-to-day basis, not only enables businesses to be in control of their daily finances, but also offers assurance that funds are received and payments made when they should be.

If cashflow is not managed properly, companies run the risk of not having sufficient funds to keep their business going. They will not be able to transact or make payments on time, both to suppliers and employees. This may result in damage to its reputation and brand which could in turn lead to even shorter payment terms from suppliers and increased financing cost from lenders. On a less severe note, having idle cash in accounts means a loss of opportunity to earn greater interest or returns on the money.

There are many simple, convenient and affordable tools and tips that can help businesses to monitor and manage their cashflow:

  1. Bank online
    Internet banking is one of the easiest tools to use and is readily available to businesses. For instance, OCBC’s business internet banking portal, Velocity@ocbc, gives customers all their account information at one glance with the option to receive timely notifications on cash transactions via SMS o. They can also schedule and plan their payments in advance on the Velocity@ocbc platform. Online banking can significantly help them manage their payment carefully and track overdue receivables, thereby making better and more informed decisions.

  2. Subscribe to e-alerts
    An e-alert service, which we offer to customers, provides ready information on their business cash flow & trade transactions. With up-to-date information on their accounts anytime and anywhere, business owners can make prompt and informed business decisions even on the move.

  3. Bank on the go
    Mobile banking is not just for individuals. In 2016, we launched the Business Mobile Banking app to Singapore-registered users of Velocity@ocbc so that they can access their account balances and transactional activities at just the touch of a finger, using fingerprint recognition. This year, we enhanced the app so that customers can not only perform and authorise transactions through the app, they can also initiate funds transfers to business associates’ OCBC Bank accounts and make account balance enquiries using voice recognition, through Apple’s voice-controlled personal assistant, Siri. These innovative solutions can vastly improve the way in which business customers manage their everyday business banking needs.

  4. Work within their means
    Be mindful not to stock up on more inventory or supplies than required.

  5. Get better terms
    Where possible, work towards reducing payment tenors offered to buyers and extending payment terms to sellers.

  6. Keep abreast of developments
    At times, businesses do not understand the economic positions of their buyers and suppliers. Hence, it is always a good idea to keep abreast of the recent developments within their industry.

  7. Work with key counterparties
    Businesses should take the time to meet regularly and understand their key counterparties’ pain points and re-assess the payment cycles that will mutually benefit both parties. This will help to further cement the relationship with their business partners in these difficult times.

  8. Speak to their banker for other financing solutions, if necessary
    Supply chain finance is another solution which helps businesses improve liquidity and optimise their working capital. It also provides extra security at potentially a lower cost. This is especially useful in times of challenging economic conditions where suppliers face increased pressure from buyers to extend longer payment terms, and businesses are placing greater emphasis on optimising their cash conversion cycle. With supply chain finance, businesses can accelerate the conversion of receivables to cash to optimise their working capital and balance sheet. That said, businesses should first understand the various banking tools and solutions that are available to them, so that they can evaluate their options before taking any action.

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