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n How can we persuade our creditors to help finance our business by
waiting a little longer for their money?

n How can we shave a little, or better a lot, off the time it takes for
us to get what is coming to us from our debtors?

n How can we reduce inventories without affecting our levels of
service?

n Do we have bank accounts with idle credit balances?

n Do we understand the bank charges and shop around for the best
deal?

n Do we use the right bank for each aspect of the business?

n Do we understand all the borrowing and deposit instruments that
are currently available? (A client of mine, some years ago, when on
holiday in the Caribbean, chatted idly to a local banker in the bar.
The banker mentioned that his bank was able to offer businesses
loans at 3 per cent. My client, who was at that time borrowing to
finance the business at double digit interest rates, set-up a small
office on the island and not only re-financed his business, but
became a very profitable lender of first resort for other UK
businesses. A high-risk strategy in the long term, but as he said:
“profits and risk are bosom buddies”. In the short term at least he
made enough money to lose all interest in running his car
dealerships.)

n Does the company monitor any currency exposure to keep the risk
as low as possible? (Volatility of foreign exchange markets driven
by something that they like to call sentiment, can increase the risk
of overseas trading. On a personal note I love South Africa, but
when working there in recent years it has been an interesting
experience to see my income, paid in local currency, decline
literally as I speak.)

n Do we cover risk at the lowest possible cost?

Cash flow

It is a basic premise of business finance that more companies fail through
adverse cash flow than fail through lack of profits. In simple terms it too
often takes longer to get your money in than it does to spend it. Expansion
is fraught with danger for many under-capitalized companies. Because of
the time lag that always exists between spending and collecting money,
doing more business can drive a company into the ground.

n Do we have enough money to finance the gap between using our
working capital and receiving what is due to us?

– Where will the money that we need come from?

Knowing the numbers 133