Topping up your cash flow

Patrick HamillStatistics show many directors do not have the time to assess their businesses due to corporate obligations, but those that bury their heads in the sand don’t avoid problems, they just get hit by them when it’s already too late.

Preventative maintenance is more productive than maintenance itself, and assessing your business regularly is proactive, efficient and effective.

To begin with, see if any of these common problems apply to your business. If they do, some quick fixes will immediately make a difference to your bottom line.

Employee absenteeism
Absenteeism is a costly overhead that is unnecessary. However, high absenteeism must raise the fundamental question – WHY?

Working conditions and low morale are dominant factors here. Absenteeism can be overcome by restructuring the workplace for employees.

The cost of shifting employees from their normal everyday activities to cover absenteeism can be offset by offering attendance allowances. This raises both attendance and morale.

Flexible holidays as opposed to fixed have a positive effect on absenteeism. Using an accruement method of determining holiday pay ensures employees maintain a higher attendance rate.

Currency fluctuations
Both importing and exporting activity require businesses to be vigilant where fluctuations in exchange rates are concerned.

It is extremely difficult to curb a volatile fluctuation in currencies. However, planning ahead in costing your goods and services with a set exchange figure in mind with a tolerance level of +/- 10% is prudent.

Furthermore, liaising with overseas (especially suppliers) prior to purchase to agree a window of payment (i.e. one to three months) may assist your business in that you would be able to pay your supplier at a more favourable rate.

Remember, the downturn is currently global and providing you have a good relationship with your supplier, they should be willing to help you.

Raw material costs
Raw materials have an impact on your bottom line. Your supplier may incur costs that are dictating what you pay for your goods.

Negotiate with your supplier to bring the unit cost down. The likelihood is that your supplier needs your business and is willing to assist you.

Failing that; shop around as there will be more than one supplier looking for your custom and may offer incentives such as an introductory rate more suitable to your business.

Doing simple homework may save a business as much as an extra 15% on raw material costs alone.

Patrick Hamill, managing director, PH Corporate Analysis.