Cash is like the blood in our veins that keeps our heart pumping; cash is what keeps a business pumping!
Cash flow is one of the most critical components of success for any small business.
There are many reasons why a business can have cash flow trouble, some of which include;
- Your customers making late payments to you
- The business expanding too fast and the money runs out
- Plenty of payments are due at the same time
- Costs just seem to rise every year – rent, fuel or electricity just to name a few
- Buying equipment you don’t really need
- Holding too much stock, and
- The economy or government in general
And the list can go on and on if you are not careful!
All of these factors and many more will have an impact on the cash flow of any business. The key here though is to take action once you have established the problems.
If this sounds familiar, you have opportunities to introduce new or different strategies, systems and routines to fix any cashflow problem – they just won’t go away by putting it in the “too hard basket”!
As a small business owner, it’s up to you whether your business thrives or dives!
Every business needs to have a cash flow budget. Be honest with your numbers! The more often you look at your figures, the better understanding you will have of how your business is tracking. Predict the future cash flow and compare this with the actual results.
The difference between them will help you understand what is happening in your business.
Don’t put your head in the sand, unfortunately avoiding the problems will only give them the opportunity to grow bigger and get deeper.
It isn’t all bleak; I have compiled a list of some strategies that may help you improve the cash flow of your business;
- Change the current payment conditions for your clients. With your problem payers, introduce COD or payment upfront.
- Do invoicing daily, not weekly, monthly or when you have time. The client can’t pay you until they have received an invoice.
- Maybe offer a discount for payment made in full upfront. It is always better sitting in your bank account rather than someone else’s.
- Ensure your team follow a system rigidly designed for collecting cash. Whose job is it to collect those accounts that have been outstanding for a while?
- Is it time for a promotional event or a big sale? No matter how tough things get, you cannot stop marketing and promoting your business.
- Reduce your costs and get better deals, hunt around for more competitive suppliers. Pay bills on time to avoid fees or to receive discounts.
- Perform checks on any new clients. Are they good payers? If not, think carefully about taking them on, as a “leopard rarely changes their spots”.
- Make sure you deliver on time – if you don’t, you can’t expect to be paid on time – it can be that simple!
Sometimes, even with all your endeavors, these actions may not help.
Your business may simply be insolvent – beyond rescuing. Making the decision to wind up a business is not easy, consult a professional for advice on what courses of action you need to take that will be best for your situation. As a business owner it can be such an emotional decision, it is important to speak with someone who understands small business but doesn’t have the emotional investment you may have.
Talk with your accountant. We are here to help. Contact us via http://www.zjl.com.au