Strategies to Improve Financial Performance

Whether you're a large company, government department, small business or charity, financial performance is important.  Better financial performance is not just about maximising profit, it could be reducing your losses or providing more services with limited funds.  Here are some strategies to help improve your financial performance. 

Take charge of your cash

·          Always have a cash flow budget.  Review and update it regularly.  Manage your cash flow by timing payments.

·          Reduce the number of bank accounts.  Use electronic banking to reduce fees & charges.

·          Select a bank account that suits your business needs to reduce facility fees and overdraft rates.

·          Invest surplus funds in higher interest accounts and match your assets to your liabilities.

Manage your inventory

·          Maintain inventory levels to match required production/sales volumes.  Use minimum re-order points.

·          Assess the possibility of reducing the different types of inventory held.

·          Arrange delivery of inventory to coincide with production requirements i.e. 'just in time'.

·          Try to obtain inventory on consignment where possible to reduce level of cash tied up in inventory.

·          Perform regular stock takes to identify obsolete, damaged and slow moving items. 

·          Salvage whatever stock you can.

·          Reduce production of slow moving items.

Improve debtors

·          Encourage cash and credit card payments where possible. 

·          Only offer credit as a last resort.

·          Have your debtors complete a credit application, review their financial statements and perform reference checks.

·          Speed up collection efforts by dispatching statements early and promptly following up debtors

·          Deal with all debtor queries promptly. 

·          Take steps to reduce errors in dispatch, invoicing, addresses etc.

·          Consider charging interest on overdue accounts or at least 'note' that interest is payable your invoices.

·          Restrict credit terms down to 7 days.  Offer small discounts to encourage prompt payment.

·          Reduce sales/volume discounts to slow payers to reflect additional time and cost of follow up.

·          Consider factoring debts.

Organise suppliers

·          Seek maximum credit terms from your suppliers. 

·          Pay once a month, on due date.

·          Unless your 'cash rich', always take up instalment payment option.

·          Negotiate cash and quantity discounts to reduce unit cost and delivery cost per unit.

·          Spend 'downtime' looking for more competitive suppliers with better prices & terms.

·          If you use foreign currency to pay suppliers, consider hedging.

·          On receipt of goods, check all goods to ensure your order is complete and you get what you pay for.

·          Increase your purchasing power by forming 'buyer groups' with similar businesses not in direct competition with you.

Grow your income

·          Select a pricing strategy that reflects cost, product attributes and product lifecycle.

·          Analyse marginal profitability of each product and focus marketing efforts on more profitable lines.

·          Analyse key competitor product weaknesses and capitalise on them.

·          Reduce production cost in unprofitable lines, otherwise cease or reduce trading activities in these lines.

·          Review sale trends by customer.  Contact customers with declining purchases.

·          Target profitable customers, products & segments.  Develop customer retention strategies.

·          Analyse reasons why new business opportunities and/or tenders are lost.  Fix these weaknesses quickly.

·          Offer after sales support & warranties to reduce risks to customers.

Control your expenses

·          Develop a detailed expense budget and capital expenditure plan to enable future monitoring.

·          Monitor expenses regularly and scrutinize large, unusual or unplanned expenses.

·          Ensure appropriate documentation and authorisation controls are in place to approve all expenses.

·          Optimize business financing costs.  Consider leasing vs. buying, optimum level of debt to equity.

·          Maximise utilisation of assets, space or resources by shedding any excess capacity.

·          Enhance productivity by reducing duplications and inefficiencies.

·          Shift as many costs from fixed costs to variable costs to align income with expense.

·          Protect yourself against large losses by buying insurance.

·          Perform regular equipment maintenance & system back-ups.