Cash flow is one of the top challenges small to medium businesses in Australia face. Businesses who want to keep moving forward need a stable cash flow, which can only be achieved by keeping receivables and payables in check.
2020 was a tough year for everyone, with some 70% of small to medium business owners experiencing issues such as late payments to employees and suppliers, or sometimes denying themselves any pay packet at all when cash was scarce. To help, we’ve come up with some simple ideas on how to not only improve your cash flow, but future-proof it.
Forecast and plan for the future
A great step in the right direction is getting your debts well and truly under control, because if your debts are mounting, you’ll keep juggling cash and lose sight of running your business. To do less juggling and get more cash flowing, get into the habit of preparing even the simplest weekly cash flow forecast.
Make notes on a piece of paper, jot things down in a pocket book or even use the notes app on your phone. It’s all about acknowledging your situation for the week, knowing where you stand and staying on top of what has to be paid and when payment is due.
Another good tip is to have solid plans and procedures in place for collecting outstanding debts, so when there is an issue, you’re not caught flat-footed and wondering what to do. Being prepared means you know how to act and get the result you want – payment.
Stay on top of your balance sheet
Having and maintaining good financial records is essential for keeping your business on track. So, make sure your balance sheet is always up to date, monitor it often and make sure all your invoices and payments are entered weekly into your financial system. Don’t forget to also review your profit and loss statement monthly to see what is and isn’t working for business growth.
A lot of small to medium businesses suffer from high-staff turnover, which can lead to an incredible drain on cash flow, your time and financial resources looking for new staff, then training them. If staff are often leaving, take a closer look at your recruitment approach. Have a clear idea of what attributes you want in a person and stick to your standard, so you hire the right people in the first place. Be supportive and appreciative of your staff, so they feel like an essential part of your business and its success, not just employees.
Even if you go back to the basics and get everything right, there may be other reasons why cash flow management could really impact your business. In particular, access to finance when you need it. If you can’t call on a financial lifeline, it could mean putting a stop to your future plans. Short term financial help can be found in the way of a line of credit – meaning you have the funds there when you need them and only have to pay fees and interest when you draw down from it.