How to find hidden cash in your company – Part 2
In our first article on helping you to find hidden cash in your company we discussed that during periods of business growth it can be easy to lose sight of managing money.
When you fail to manage and maximise your cash effectively it’s almost considered as stealing from yourself! Our first tip to find hidden cash in your company was to focus on customers who owe you money and how to setup a discipline around collecting money.
We’d like to share our second instalment on how you can maximise your money and generating more cash in your business.
Stock control – have you got money tied up in unsold goods?
If you are retailing something, either a consumer product, or a B2B product, you may have stocks lying around in a warehouse that are not moving. This can be for a variety of reasons:
- slow moving stock
- products becoming obsolete
- buying too much stock all at once
- not having sufficient numbers of popular items
- not buying an optimum amount to minimise shipping charges
All of these involve the business having money tied up, which could be used better.
Effective stock management requires some simple ongoing analysis, a bit of planning and then action. Here’s an example:
We work with a client who sells products to big companies. There are lots of different lines and their stock holdings were high. We did a simple list of all their stock lines and quantities. We matched these with sales over three and six months. For any lines where they were holding stock for over six months, we helped them look at ways of reducing those. By setting minimum order levels and average order levels this optimised their stock holdings and reduced the amount of cash being tied up unnecessarily. The end result was that their stock investment was reduced from £250,000 to £184,000 while revenue increased by 52%. That’s quite a good treasure hunt!
When the team at Your Right Hand Finance Team examines the operations of a business, we often find “hidden” money – we like to think of it as finding buried treasure!
Our third and final instalment will expand on how to find further cash in your company, and in the meantime take a look at how and why we focus in helping business owners to get their cash working for them.
Contact Your Right Hand Finance Team for more information or call 01252 820 002.