Who can argue against having more cash in the bank?
More cash = more options. More options = less stress. Less stress = better choices. Better choices = better success. Better success = more cash…. and around it goes.
BUT we see a large number of businesses failing to recognise this. Many business owners consider revenue to be the dominant contributor to their business performance and profitability. And when you’re running a growing business, juggling many hats, when do you have the time to consider other indicators? The hard truth is that a great number of successful, revenue strong businesses fail because of cash flow mistakes, which could’ve been easily fixed.
Here are our top 5 cash flow tips for improving your cash flow!
1. Prepare a cash flow forecast – most things are predictable if you spend the time working it out. Sit down with your accountant (or get a better one if they’re no good) and undertake some forecasting of where your cash is going over the next few months.
2. Evaluate your customer terms – if you are paying your suppliers 20 days after they invoice you and your customers are paying you 40 days after you invoice them, then that equals a big gap that you have to fund. If you fund it then that’s less cash for you. Tighten up your payment criteria.
3. Enforce payment – come on, harden up guys. If people haven’t paid you then they either genuinely can’t (and you shouldn’t be selling to them) or they’re taking the mickey. Tell them there are perfectly good banks out there that love being banks and last time you looked you’re not one of them. It’s great being charitable, but don’t confuse business from charity! To be good at both requires not confusing the two.
4. Turn over your stock quicker – you either sell stuff or you sell time (services). Either way don’t let it just sit there. Turn it into cash quicker. Look at your badly performing inventory lines and get out of selling them. So much money can be tied up in slow moving stock. The same principle applies to people selling services. Just get your invoicing done quicker. We come across so many tradesmen who take forever to get their invoicing out. What’s wrong with sending immediately after the job has been done?
5. Utilise technology – the technology is out there to easily make cash a priority. You need to ensure you’re using a cloud based accounting product like Xero and you know how to use it. These products should be a business owner’s best friend – and not left solely to the bookkeeper or accountant. They provide the flexibility to keep up to date on your cash flow position and can be viewed anywhere you take your laptop, tablet or mobile phone.
Get those things right and you’ll have more cash around. That should help put a smile on your face.
Contact: 1800 736 203