Azets’ five cashflow management tips for SMEs – Keeping tab of supplier/creditor payments

Swapping credit cards with virtual replacements could help Yorkshire SMEs improve their cashflow, a senior finance professional has advised.

Matthew Grant, Yorkshire head of accounts and business advisory at international business advisory group Azets, said that removing traditional cards for orders, expenses and other expenditure gives a business greater control.

It is one of five top tips for SMEs to recalibrate their orders and processes to improve cashflow when it comes to suppliers and creditors:

• Review suppliers at least annually and compare to competitors. Comparing prices, payment options and offerings provides the opportunity to test the market and renegotiate purchase arrangements or payment options to improve margin.  It can be difficult to remember to do this regularly – but setting an annual or quarterly diary reminder can help.
• Review controls on ordering: It’s common for SMEs to tie up too much cash in stock unnecessarily.  Reviewing orders against sales and inventory will help stop over ordering and preserve vital cash. This also applies to company expenditure from pens to uniforms and tools. Reviewing regularly is key to ensuring controls are appropriate to ensure optimum cashflow and stock management.
• Set budgets and delegate authority for spending. When reviewing controls on ordering, set clear limits on who can issue purchase orders for stock or supplies – and ensure that spending limits are in place for each individual so they can only authorise expenditure for a certain amount or for certain orders.
• Negotiate deferred payment agreements. Focus on payment options and not just price. A supplier may have no room for manoeuvre on price or they may be cash rich where timely payment is not a priority. Could they, for example, take payment on 45 days rather than 30 or accept payment in instalments. It is worth asking the question – don’t ask, don’t get.
• Remove credit cards. This is especially useful for staff who operate out of the office. Simply removing company credit cards so staff have to spend personally and then claim back on expenses can make them seek better value and halt spending on items which may not qualify. Alternatively, there are many apps which allow SMEs to set up virtual credit cards either within the app itself or in a phone’s wallet.  Manage cards remotely to review activity, adjust spending limits or easily add or remove credit cards to avoid over or unnecessary spending. Pictures of items and receipts can be scanned into a virtual credit card app. And Apps can link with software accounting packages to cut administrative time and costs, while providing a more accurate and updated picture of cashflow.

Matthew, who is based in Azets’ Leeds office, said: “At a time when the cost of doing business continues to squeeze SMEs and their finances, it is important to ensure no cash leaves the business or is tied up in stock than is necessary.

“Reviewing and then adjusting all of the ways a business spends money on a regular basis along with its relationship with suppliers are key.

“This can be difficult amid the daily demands at an SME but blocking out time and seeking professional advice can result in significant cash flow gains over time and a better financial position that allows investment and growth.”

Azets has three offices in Yorkshire, in Leeds, Bradford and York, where it employs 335 people.

For more information about Azets, visit www.azets.co.uk