Nikki Viljoen offers insights into managing your working capital and your advertising.

Working Capital Management

Ensuring that you manage your working capital correctly will have quite an effect on your cash flow as it ‘releases’ monies that would normally go towards expenses.  Let me explain – your clients pay you at 30 days, but your suppliers want payment up front.  This means that you are carrying the whole thing financially on your own (it will also have an impact on your risk management).  By negotiating better payment terms with your suppliers and/or your clients, you will decrease your risk and have a better cash flow situation and a stronger working capital, which could go towards growth and/or expansion.

Another critical area to look at is your debtors list.  Make sure that you follow up on outstanding or overdue accounts on a regular basis and don’t be scared to put ‘errant’ clients on ‘hold’ or in extreme cases, even firing them.  Remember this is your business and you make the rules. 

Stock is also something that needs to be managed both effectively and efficiently as this is one of the first areas that you will experience losses in when there is  a downturn in the economy (ok, if the truth be told this is all the time, not only when things become a bit rough).  So stock needs to be properly controlled to ensure that the shrinkage is kept to a minimum and that stock levels are kept to acceptable levels.  Too much or too little stock on hand also has its own consequences.  Oh, and don’t forget to make sure that your stock is properly and adequately insured and that (particularly with perishables) and that the FIFO (first in first out) method is used, that way you will not end up with stock that has expired.

Advertising

One of the first things that seem to go for a ball of chalk when times are tough is your advertising.  This is not good at all.  Think about it logically and calmly for a moment.

Taking your marketing out of the equation means that less and less customers are going to know about you and less and less customers are therefore going to buy from you! Crazy that - you are wanting to increase your sales, which means your marketing and advertising should increase.

By all means, modify the way that you market yourself.  Cut down on say, using the big PR agencies (or any agency for that matter) and try to do things for yourself. 

Get an e-mail campaign going or use the social networking sites and twitter to drive people to your website.  Start a newsletter and give ‘useful’ information to your clients. Make sure that you are still in the forefront of their minds and that they don’t forget you and go to your opposition or competitors as a result of this.

So change the way that your market yourself, if you must, but ensure that the amount of marketing increases rather than decreases.


Nikki Viljoen is an Internal Auditor and Business Administration Specialist who can be contacted on 083 702 8849 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it or http://www.viljoenconsulting.co.za 

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