As the impact from the global financial crisis continues to ripple through the Australian economy, 2009 is set to be the year of cash flow management for many firms. By Melissa Wilkinson

The next 18 months are predicted to test even the most seasoned business management veterans.

Managing your cash flow or working capital is about making sure that profitable trading actually turns into cash. As consumers tighten belts, there are some cash flow strategies you can start immediately.

Pay attention to invoices
It's difficult to be paid on time if your invoices are incorrect or sent out late. Make sure that your accounts team or bookkeeper has the information required to issue correct invoices. Omitting purchase order numbers, incorrect addresses or names can all slow the payment process.

Stay close to your customers
Many people find the task of chasing outstanding funds daunting, as they're worried about getting customers offside. It's important to stick to your terms of trade and be on the phones the day after payment is due. Make sure you know your customers' payment cycles.

Outsource debt collecting
You can outsource some of your credit and collection activities in order to tighten your days receivable, but be careful who you engage. If the quality and service standard are out of step with your brand, it can potentially damage relationships with customers.

Keep stock levels low
Inventory sitting in your warehouse is the same as cash left on your stockroom floor. It's critical to keep stock levels low so that capital is freed up for other activities. Review your buying procedures, negotiate consignment stock from suppliers or outsource parts of your supply chain.

Scrutinise new clients
Undertake a credit assessment before you accept new clients. Make sure that they clearly understand your payment terms and agree to your conditions at the beginning of the relationship. Have shorter credit terms for new clients.

Pay slowly
Make sure to maximise the payment terms available so that your cash can be kept in the bank as long as possible. Review key supplier expenditure and try to negotiate better terms.

Sell under-utilised assets
Review assets to find out if there is any under-utilised plant or equipment. Selling idle machinery and then hiring it back when required is a useful way to free up capital.

Make sure your financing is appropriate
While the current tight credit conditions are making it difficult for many firms to refinance, it's important to review your borrowing arrangements. Talk to banks to make sure you're getting the right debt structure for your business, and that it is giving you the flexibility required. Consider asset-based finance or leasing.

Link performance to cash flow
Some companies have found that linking working-capital targets with senior management's key performance indicators can be a powerful way to ensure that cash flow issues are kept in focus at all times.

Prepare a cash flow budget
This is a critical management tool to help you forecast expected cash inflows and outflows. It's a useful way to help you plan for upcoming expenses or take advantage of opportunities to utilise surplus cash.

It's prudent to include some contingency funds in your budget in the event a major customer is late paying, sales drop sharply or you experience a large blow-out in costs. Review actual versus forecast cash flows to identify any emerging issues.