Here are some great resources for SMEs like you.
Good cashflow is one of the strongest indictor of a great business, specially for SMEs. It is the fuel that drives the business to grow. The business’s cashflow affects all aspects of the business which includes profit, credit standing, growth and operations.
It is common to face cashflow problems in any type of business, but even more common for SMEs. It may be due to lack of experience or reach, among other things. Here are some things to keep an eye on to prevent major cashflow problems:
1. Income – Expense
Be mindful of your expenses. Cost cutting is the most important method in improving cashflow. You should be able to identify items that are not necessary but incur cost or alternatives that would cost less without compromising quality. Measures like these will help you save money that you can use for essential items for your business or lessen your expense. If your expense exceed income, that means your business is hemorrhaging money.
2. Pricing = Profit Margin
Another factor to look into when it comes to cashflow is pricing. Check if there is sufficient gross margins. There are many factors considered when making the pricing scheme. But it will be ideal to double check it once in a while. Prices for your inventory or raw materials would probably be different now than when you were making the business plan. From your assessment, you can determine your next strategy. Some businesses look for a cost-efficient way to keep the present price-point because they are afraid to lose clients to competitors with cheaper price. But some businesses choose to reasonably increase their price to keep the quality of their offerings. But whichever route you take, the right profit margin will keep your business going.
3. Review your Overhead expense
Evaluate your current staff. If you have 25 employees, would the business still run effectively with fewer? Are all the employees fully utilized for their skill and time? It is advisable to run a lean but mean team for your business until a need arises. Nonessential overhead is very costly for any business. A skeletal team of competent professionals would be ideal to start and grow a business. It would be smoother to adjust and add people when the growth of the business demands for more hands on deck.
4. Pay bills early
This may not be a very traditional strategy but worth pondering. Yes, we want to keep the cash for as long as we can. But scheduling the timely payment of bills and other payables are also important to keep the business running. It is important to pay on or before the due date to avoid late fees, interest and inconvenience. This helps in proper management of cashflow, which includes the schedule of payment.
5. Customer discounts
There are times that you would have to give some to get some. Offering customer discounts can be a way to encourage customers to pay on time. A very good example is the term discount “30/2/10”. This means that the customer is given 30 days to pay but will be given 2% discount if paid within 10 days.
Poor collection methods can break your business. Create a receivable aging schedule and monitor it weekly, so you know which customers are falling behind on their payments and how much you should provide as cash buffer until you are able to collect. You should be able to detect credit problems early so it will be addressed right away. Problems such as too much bad credit and slow paying invoices will be the bane of your business’s existence. Though it might work to your advantage in acquiring and retaining customers by offering terms of payment, it would be advisable to keep it short at first. Some will offer terms after 6 months (or more) of good relations, usually on Cash on Delivery (C.O.D.) basis prior to granting terms on payment or credit line. It will also help if you indicate in your invoice that you will charge a late fee and indicate the penalty interest for late payment. Note that it is also important to ensure your customer receives the invoice within three days from the invoice date. A credit rating report like the CreditBPO Rating Report is recommended by many so you can have a solid basis for your credit management.
7. Cut inventory
Too much inventory, specially the ones sitting on shelves and tying up your cashflow will harm your business. Fine-tune your inventory based on your volume, sales forecasts, available cash and supplier capabilities. Having your key products out of stock will definitely cause you to lose customers. Balance is the key. CreditBPO will help you pre-clear the right suppliers for your supply chain – granting greater efficiency and shorter processing times.
8. Cut back or delay expansion
Stop non-critical capital outlays, unless the return on investment is immediate and assured. Instead of spending money today to develop new products/services or opening new shops/offices, focus on building, maintaining and improving your proven products and services. It is best to avoid risky projects as they will most certainly cause a drain in your cashflow. Do due diligence before any major cash outlays.
9. Teach employees to upsell and cross-sell
Have you ever gone inside a store intending to buy only one item but ended up buying more than you intended? Make sure that they all know your products/services and remind them to have a happy attitude in explaining the difference to people and why they will be needing the other products you are offering them, whether to customers or friends.
For online businesses, enable upsell and cross-sell features in shopping carts. These features contribute a significant amount in sales for online shops.
10.Accept cash or credit/debit cards
Give your customers the option to pay cash or card. You don’t have to be a retail store to accept credit card payments. Businesses and government agencies as well as consumers use credit cards to make a wide variety of purchases. Instead of waiting 30 days, 60 days, or more to collect payment from your customers, you can get paid in 2 or 3 days by asking them to pay using a credit card. You'll have to pay a percentage of each sale to the credit card company, and possibly a monthly fee. But those expenses may be negligible when you consider the time and money you'll save by not having to send out monthly statements. This is a win-win arrangement. The customer can still string out payments, but you're not on the end of the string. As an additional advantage to speeding up cash flow, it can help you speed up payments to your creditors. This may lower or eliminate interest payments you make on your payables.
Check it out and let us know what else you might need.
|INTEREST RATES ON LOANS AND DISCOUNTS GRANTED|
|(For the period December 30, 2019 - January 3, 2020)*|
|1.||Asia United Bank Corporation||30.0000||3.0000||28.3680||6.0000||12.0000||6.0610|
|2.||Bank of Commerce||18.2871||3.7000||19.1195||6.7500||6.7500||6.7500|
|3.||BDO Private Bank, Inc.||6.0308||6.0000||..||..||..||..|
|4.||East West Banking Corp||10.5600||2.7500||16.4810||6.2500||17.4150||7.0000|
|5.||Al-Amanah Islamic Inv Bnk of the Ph||4.5000||3.0000||..||..||..||..|
|6.||Phil Bank of Communications||37.4000||2.0000||42.0000||10.1200||9.5000||6.0000|
|7.||Phil Trust Company||10.0000||6.5000||4.2500||3.2500||..||..|
|8.||Philippine Veterans Bank||10.1680||7.2740||23.1870||10.0000||21.7910||6.7500|
|9.||Robinsons Bank Corporation||28.9450||3.2500||50.0270||6.2500||18.5320||6.7500|
|SUBSIDIARIES OF FOREIGN BANKS:|
|10.||Chinatrust (Phils) Cbc||9.0000||0.0000||37.5400||7.6250||7.7500||2.2500|
|11.||Maybank Philippines Inc||9.7250||1.7500||25.4400||6.0960||14.6640||6.2500|
|1.||ANZ Banking Group Ltd||4.5500||4.0000||..||..||..||..|
|2.||Bangkok Bank Public Co Ltd||6.7500||4.9750||..||..||..||..|
|3.||Bank of America N.A.||..||..||..||..||..||..|
|4.||The Bnk of Tokyo-Mitsubishi Ufj Ltd||5.9000||4.1300||5.0500||4.4000||..||..|
|5.||JP Morgan Chase Bank National Assn.||..||..||..||..||..||..|
|7.||Deutsche Bank Ag||6.3100||3.6500||..||..||..||..|
|8.||Mizuho Corporate Bank Ltd||5.5000||3.6500||4.3500||4.3500||..||..|
|9.||Hongkong & Shanghai Banking Corp||25.9900||4.4500||21.9900||14.2900||..||..|
|10.||Internationale Nederlanden Groep Bk (Ing Bank)||4.3000||4.3000||..||..||..||..|
|11.||Mega Int'L Comm'L Bank Co Ltd||5.2500||5.2500||..||..||..||..|
|12.||KEB Hana Bank - Manila Branch||..||..||..||..||..||..|
|13.||Standard Chartered Bank||5.9300||3.9430||..||..||..||..|
|14.||Bank of China Limited||..||..||..||..||..||..|
|15.||Cathay United Bank Co. Ltd. - Manila Branch||..||..||..||..||..||..|
|16.||Sumitomo Mitsui Banking Corporation - Manila Bran||4.2500||4.0000||..||..||..||..|
|17.||Shinhan Bank - Manila Branch||..||..||..||..||..||..|
|18.||Industrial Bank of Korea - Manila Branch||..||..||..||..||..||..|
|19.||United Overseas Bank Limited - Manila Branch||5.0500||5.0500||..||..||..||..|
|20.||First Commercial Bank, Ltd - Manila Branch||..||..||..||..||..||..|
|21.||Hua Nan Commercial Bank Ltd - Manila Branch||..||..||..||..||..||..|
|22.||Chang Hwa Commercial Bank Ltd - Manila Branch||..||..||..||..||..||..|
|23.||CIMB Bank Philippines||36.0000||30.0000||36.0000||30.0000||..||..|
|1.||BDO Unibank Inc||42.0000||3.0000||43.6800||4.7500||18.6810||4.5000|
|2.||Bank of the Phil Islands||18.0000||1.1500||35.2800||3.8500||11.7890||3.6200|
|3.||China Banking Corp||42.0000||0.0000||13.8040||4.4560||8.2500||5.2500|
|4.||Development Bank of the Phil||8.0000||0.9550||15.0000||6.5000||7.0000||3.0000|
|5.||Land Bank of the Philippines||15.0000||1.0000||14.0000||2.0000||12.0000||3.7710|
|6.||Metropolitan Bank & TCO||10.0000||1.5000||11.7300||2.2500||9.4700||4.7500|
|7.||Phil National Bank||13.0000||2.5000||19.3950||4.4950||9.5000||5.0590|
|8.||Rizal Comm'L Banking Corp||12.6300||2.2600||9.0000||8.0000||9.0000||6.1500|
|9.||Security Bank Corp||107.3590||1.3000||39.5280||6.7500||18.5030||5.2920|
|10.||United Coconut Planters Bank||25.5950||0.0000||35.0900||0.0000||9.5000||5.7500|
|11.||Union Bank of the Phils||42.0000||5.0000||10.4300||7.2500||8.2500||6.0600|
|*||Covers data for the week which begins on Thursday of the current week and ends on Wednesday of the following week (December 26, 2019 - January 1, 2020)|
|. . . Blank|
|1. Interest rates above refer to actual rate charged or paid for the use of money, expressed as an annual percentage of the principal.|
|2. Short-term interest rates refer to interest rates charged on loan contracts or debt instruments with maturity period of one year and below;|
|medium-term interest rates on loan contracts or debt instruments with maturity period of more than one year to five years; and long-term|
|interest rates on loan contracts or debt instruments with maturity period of more than five years.|
|3. Some banks charge lower interest rates on medium and long-term loans compared to short-term loans because the former are secured|