POSTED 7 Apr 2017 - 07:17

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

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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 Trotter
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 or email. 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.

Top Response

ALEX@SG

Cash flow problem is not only a problem for small business. It can be a problem for medium size enterprises (> S$10M in revenue).

This happens when
1) No budgeting carried out. Revenue forecast is important
2) Poor management of account receivables
3) Poor visibility of...

Responses

Susan
20 Mar 2018 - 10:21
  1. Introduce Real-time Accounting
    It’s often not enough to simply know your numbers; you need to be certain that they’re accurate and up-to-date. Working with fresh financial information is the dream operational scenario, as it allows you to make
    informed and effective decisions that will positively impact your cash flow. And the simple truth is, trying to manually input that information into a spreadsheet daily or weekly can quickly leave you behind the curve. By introducing cloud accounting to your business, you’ll enjoy all the benefits of having access to real-time data, while also experiencing a major boost in confidence where your decision making is concerned.

  2. Demonstrate Exceptional Expense Management
    Sometimes growing your cash flow has more to do with trimming expenses than it does with increasing sales. Once again, cloud accounting software can help, allowing you to demonstrate exceptional expense management by offering a clear picture of when and where your money flows back out of your business. By running daily, weekly, or monthly reports, you can identify surplus costs and pinpoint areas within your business ripe for streamlining.

  3. Get What You’re Owed
    Do you know if your clients have paid you on time? If you find yourself running into cash flow crisis after crisis, clamping down on debtors can be a worthwhile exercise. After all, you’re running a business too, and you deserve to be paid on time for the products or services you provide. That’s where implementing a cloud accounting platform can come into its own; with automated invoices and reminders, your customers will have no excuses for not paying you within the agreed time limit.

Grace
18 Jan 2018 - 21:18

I personally work with in fintech and I want to highlight not only my company but the many other alternative solutions present in the market that SMEs can consider with regards to cashflow!

(1) For lump sum cash- P2P lending
Companies in this space include Funding Societies, Moolahsense, Crowdo, Minterest etc etc

(2) For tapping on existing credit - cards
Companies in this space include iPaymy (my company!) & Cardup. How this works is that the company offers a platform that you can use to pay your invoices, rent and salary via credit card, therefore allowing your company to free up cash at the same time

(3) For invoice financing/factoring
Companies in this space include Culum Capital, Smart Funding, Bibby Financial Services, Capital Match Platform Pte. Ltd., First Trade Factoring Pte. Ltd., Global Merchant Funding Pte. Ltd., IFS Capital Limited, and Malayan Banking Berhad etc. Something to look forward to as online accounting software & book keeping gets more digitalised is that some of such software slowly integrates with the above financing options and offers seamless solutions, riding on big data and the fintech wave!

Vote up!
-1
Gregory Trotter
18 Jan 2018 - 09:14

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 or email. 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.

LINKFLOW
13 Aug 2017 - 21:37

Cash flow issues for most SMEs in very rudimentary terms usually occur because outflow of cash (trade creditors, overheads, loan servicing etc) happens faster then cash inflow (trade revenue, receivables collection etc). Most SMEs cannot afford the resource nor time to effectively monitor working capital cash flow position frequently unlike larger companies which can afford CFOs, high end enterprise resource planning software systems. Lastly, small businesses usually lack trade bargaining power of bigger enterprises which can negotiate for longer payment terms to their suppliers/vendors. As a result, most SMEs are 'price-takers' when it comes to dedicating payment credit terms from their customers at the risk of losing their contracts/relationship. SME owners can adopt some best practices of effective cash flow management. Some ways are encouraging customers to pay faster via COD discounts or periodically reviewing credit terms extended. https://smeloan.sg/blog/6-ways-maintain-healthy-cash-flow-position

-5
Vote down!
ALEX@SG
2 Jun 2017 - 13:35

Cash flow problem is not only a problem for small business. It can be a problem for medium size enterprises (> S$10M in revenue).

This happens when
1) No budgeting carried out. Revenue forecast is important
2) Poor management of account receivables
3) Poor visibility of account payables resulting in too much outflow of cash
4) Poor project management resulting delay in project completion and invoicing

Financial management is necessary from a budgeting perspective. The budgeting is carried out at the start of the work year and review quarterly.
Companies can also adopt an enterprise resource management system to address points 2) to 4). Such enterprise resource management will allow visibility of inflow and outflow of cash. Certain systems also have project management tools within.

-1
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SPH1.SG
25 Apr 2017 - 14:49

Find an effective solution for it

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