DMO Advisory

Cash Flow Improvement


In business, cash truly is king. Too many businesses struggle needlessly, or even fail, because of poor cash flow. Even a profitable business can be brought to its knees without adequate inflow of cash to ensure all necessary outgoings can be paid.

AT DMO Advisory we offer tailored solutions to improve your business cash flow but optimizing working capital and utlilising lines of credit that may otherwise not be available.

Effective working capital management encompasses the processes required to manage short-term financing and cash requirements throughout the trading cycle. By reviewing each step in the working capital cycle, we ensure effective monitoring and controls are in place for your business. Tools, training and strategies coupled with to access to various financial facilities ensure sustainable business improvement.

Happily, there are a number of steps you can take to help safeguard your business against a cash flow crisis. The key drivers for cash inflow are sales, invoicing, debtor management, workflow management and ensuring your business is properly financed.


Cash cannot flow into your business without sales. As a starting point, determine what level of sales you need to cover all known operational expenses. From there, calculate the levels of sales you will need to generate the profit levels you aspire to.

Your ability to reach your sales targets will be dependent upon:

  • your ability to retain existing clients
  • your ability to generate new leads or enquiries
  • your ability to convert those leads into actual sales (conversion rate)
  • your ability to increase the number of transactions each year
  • your ability to increase the average value of each transaction

A sound marketing plan should underpin all your sales efforts.


Boosting your sales is just part of the equation. Getting paid is the other! Your invoicing practices and systems can have a profound effect on cash flow.

Rather than wait until the end of the month to invoice, get into the habit of invoicing the day a project is finished or a product delivered. This will help keep money flowing in more consistently.

There are also psychological benefits for your clients – they may be more willing to pay your invoice during that first “flush of satisfaction” with your job well done.

A particularly good way to improve cash flow is to ask for part payment upfront, with final payment upon completion of the task.

It is also important to clearly set out your payment terms on each invoice. Ensure the due date is prominent and consider lessening the payment terms from 60 or 30 days to 14 or even seven.

Consider offering a discount for timely payment.

Debtor Management

Proactively managing your debtors can not only get money into your bank account faster, it can also help generate solid business relationships between you and your clients. A good debt management system ensures there are no ‘hidden secrets’ along the way. All terms are clearly spelt out from the outset in a transparent and fair transaction.

Debtor management begins before you even begin working with a client. If in doubt, conduct a discreet credit check on new customers.

Discuss and decide upon the fee before you start work. Depending upon the nature of your business, it may be necessary to factor in a buffer for any unexpected blow-outs.

Don’t be afraid to ask for an upfront deposit or to offer a discount for early or timely payment of accounts.

Regularly review your business’ aged receivables report and have a system to automatically take action the moment accounts are overdue. This system may, for example, involve a statement being issued at 30 days, a phone call made at 60 days and referral to a debt recovery agency at 90 days.

To help firm your relationship with your customers, consider offering flexible payment terms to those who are unable to pay the full amount.

Make it easy for your customers to pay. The more payment methods you accept (for example credit card, BPay, online direct deposit, etc.) the faster the cash will flow in.

Managing workflow

Holding inventory and delayed work in progress (WIP) can be a large and sometimes unexpected expense for businesses. Inventory can tie up your cash, while slow throughput of work can delay pay day!

Careful stock control will have a positive effect on your cash flow. Is there a way you can reduce the amount of time you must hold on to stock? This may be as simple as discussing alternate delivery dates with your supplier or reviewing bulk purchases, even when they offer discounts.

An effective WIP management system can help boost turnaround times. As noted above, increasing the value of each transaction should be a key objective for all good business managers. Faster turnaround is just one way of doing that.

Adequate financing

It is vital that you seek the right professional advice when it comes to financing your business. There are a range of finance tools and products available, not all of which will suit your business. Even if cash flow is strong, a review of your finances could result in significant savings.

Cash flow planning

Cash flow forecasting can be used to great effect as a planning tool in your business.In the short-term, it can flag when more cash than usual is needed to keep the business running.

In the longer-term, it can help you to plan for growth or to weather seasonal or other foreseeable market fluctuations.

Cash flow planning is generally done on a month-by-month basis. Benefits of using cash flow to project what may be ahead include:

  • it can help you set monthly targets and budgets
  • it can help identify your ‘break even’ point
  • plan for the purchase of new equipment, technology or tools
  • it can help conduct planning exercises to help in your decision making (i.e. measure the impact of 14-day payment terms as opposed to 30-day terms)
  • it can help you identify and plan for months where cash will be tight
  • it can highlight areas of your business in which efficiencies could be improved
  • it can help you mount a case for finance applications

Please contact us for more information on our Business Advisory Services or how DMO Advisory can assist you.