Collect your debtors faster

Managing cash flow effectively is crucial for the sustainability of any business. A significant component of this involves managing debtors efficiently to ensure that cash inflows occur on time. However, it's important to remember that even uncollected sales impact your financial obligations.

Did you know that you still have to pay tax on your debtors, even if you haven’t collected them yet? This happens because your tax obligations are calculated based on your sales figures, not just the cash you have received.

Why It's Critical to Collect Debtors Promptly

When your cash is tied up in uncollected invoices, it restricts your ability to reinvest in your business, pay your bills on time, or even meet your payroll obligations. This can hamper your business's growth and potentially lead to financial difficulties.

Therefore, collecting debtors promptly should be a top priority.

How to collect your debtors faster

Agree on Payment Terms at the Time of Sale

Clear communication about payment terms sets the stage for all future interactions with your customers regarding payments.

Ensure Your Customer Signs Your Terms of Trade Before You Start the Job

This formal agreement protects you legally and ensures that both parties understand the financial obligations involved.

Include a Guarantee in Your Payment Terms

This adds an extra layer of assurance that you will be paid, encouraging prompt payment.

Invoice as Quickly as You Can

The sooner you send out an invoice, the sooner you can expect to be paid.

Ask for a Deposit Prior to Starting the Job

This not only secures a portion of your payment upfront but also commits the customer financially to the project.

Change Your Payment Terms to Within 7 Days of Invoice or On Delivery

Shortening the payment period accelerates your cash inflows.

Send Statements Religiously at the Start of the Month

Regular updates remind your customers of their dues and prevent overdue payments from being overlooked. Implementing automated reminders through your cloud accounting system, such as Xero, can encourage late payers to pay on time. 

Have Someone Other Than the Owner Be Responsible for Collection of Debtors

This can often lead to more systematic follow-up and less personal conflict.

Document Any Changes to Your Standard Payment Terms in Writing

Keeping a written record of all terms and agreements avoids misunderstandings and provides legal backing.

Use an Integrated Payment Gateway App

This technology simplifies the payment process for your customers, making it easier and faster for you to collect your money.

Don’t Provide Credit to Customers Who’ve Been Late Payers in the Past, and Don’t Offer More Credit to Customers with Outstanding Payments

This policy helps mitigate risk and improve your cash flow.

Proactive management is key

Don’t procrastinate on your debtors. Establishing clear, firm payment terms and ensuring you stick to them is vital. Remember, it’s often the proactive, attentive businesses that manage their cash flow most effectively.

"It’s the squeaky wheel that gets the oil." – Anon

Don’t let your business be slowed down by late payments. Be the squeaky wheel, take action today. We can help.

Keeping debt low through proactive credit control. 

Having a large amount of debt in your business is bad for cashflow, weakens your overall financial health and brings down your credit score as a business.

So when customers don’t pay on time, that ‘aged debt’ is bad news for your finances. Aged debt can begin to stack up, adding to your liabilities and reducing the health of your overall balance sheet.

The good news is that there are ways to tackle late payment head-on.

Get effective with your credit control

Being proactive with your credit control procedures and debt management helps you speed up payment, reduce your debtor days and rein in your overall debt as a business

To improve the efficiency of your credit control, these strategies help speed up payment processes, reduce debtor days, and maintain a healthier financial status for your business.

Make your payment terms clear

The foundation of effective credit control is clear communication about payment terms. Ensure that your payment conditions are explicitly stated on all invoices. Additionally, incorporate a detailed credit control policy into the terms and conditions your customers agree to. This clarity helps prevent misunderstandings and sets clear expectations from the start.

Run regular debtor reports

Regular reviews of your debtor situation are vital. Run frequent reports to identify which invoices are overdue and which customers are consistently late in payments. Understanding the pattern of late payments allows you to prioritise debt collection efforts effectively.

Be proactive in chasing late payment

Being passive about debt collection is a common pitfall, however it's important to not be shy about asking a customer to pay their bill. Adopt a proactive approach by regularly contacting customers with overdue payments. Set up reminders for yourself to chase late payments, ensuring you are persistent but respectful in your communication.

Automate your credit control tasks 

Technology can significantly streamline your credit control processes. Many cloud accounting platforms offer built-in tools or integrations specifically designed for automated credit control. These systems can automatically send reminders to customers as soon as an invoice becomes overdue, reducing the manual effort required and ensuring timely follow-ups.

Leveraging technology for better credit control

The use of technology in managing credit control cannot be overstated. Automated systems not only save time but also reduce the chance of errors and omissions that can occur with manual processes. These tools ensure that all customers receive consistent communication and that no overdue invoice slips through the cracks.

If late payment and aged debt is weighing heavily on your balance sheet, we’ll help you implement the appropriate apps that support the automated systems, debtor reports and credit control processes needed to reduce debt.

Get in touch to improve your credit control.

5 ways to increase profit and improve cashflow

The dual goals of increasing profit and improving cash flow are usually at the forefront of every entrepreneur's mind, as both are essential for sustaining and growing your business. 

However, the path to profitability and strong cashflow is not always straight forward. 

Here, we explore 5 ways to increase profit and improve cashflow, offering actionable strategies that can improve the financial health of your business.

These insights are particularly beneficial for businesses navigating the complexities of the current economic landscape.

1. Sales

Profit increases when you increase sales; cash increases when you collect the money from customers. To increase both your profit and cash from sales:

• Delight your customers
• Generate more leads and referrals
• Convert a higher number of quotes or proposals
• Increase transaction frequency
• Increase transaction value

2. Invoicing

Profit increases when you send an invoice to a customer; cash increases when you collect the invoiced amount. To increase both your profit and cash:

• Set clear Terms of Trade
• Offer a small discount for early payment
• Agree the price in advance
• Stick to your payment terms
• Don’t do work for people who have overdue payments

3. Margins

Increasing your margins will increase your profit; collecting the increased margin will increase your cash. To increase both your profit and cash:

• Increase your prices
• Invoice faster
• Negotiate better payment terms with suppliers
• Reduce errors and rework
• Train and empower your team
• Increase your efficiency

4. Financing

Reduce your finance costs to increase your profit; borrow money for assets to increase your cash. To increase your profit and cash through financing:

• Spread the costs of assets over 3-5 years instead of buying them outright (e.g. vehicles)
• Borrow from a bank instead of a finance company
• Secure the asset purchases over ‘bricks and mortar’ (if possible)

5. Overheads

Reducing your overheads will increase both your profit and cash. To reduce your overheads:

• Negotiate with suppliers
• Measure your return on your spend (e.g. advertising, accounting fees, etc.)
• Review your subscriptions
• Go paperless

This is not an exhaustive list of ways to increase your profit and cash. We can help you identify specific areas of improvement in your business to increase both profit and cash. Contact us to find out how. 

"Never take your eyes off the cashflow because it’s the lifeblood of the business."

Sir Richard Branson

Seek support

Implementing these strategies requires a meticulous approach and an understanding of your unique business context.

At First Class Accounts Ovens & Murray and Busy01 Consulting, we provide bookkeeping and business consulting services that are tailored to your specific needs. We can identify areas of potential financial improvement and help you implement strategic solutions to enhance both profit and cash flow.

Don’t let the complexities of financial management hold your business back. Contact us today to learn how we can assist you implement these 5 ways to increase profit and improve cashflow.

Bringing your cashflow processes into the digital age

Keeping on top of your cashflow is even more important during tough economic times.

Over the last few years we've experienced the global pandemic, natural disasters and economic downturn. And businesses are seeing the impact of that now with cash flow becoming tighter and tighter.

Why is cashflow so important?

To keep your business operating, you need enough money coming into the business to cover your outgoings – with enough surplus cash to deliver a profit.

When economies downturn, this can have a significant impact on your income.

People will have less disposable income to spend on your products and services. Business customers will be looking to reign in their spending on suppliers. As a net result, your business is likely to make fewer sales and will bring in smaller revenues.

This means:

• Reduced income coming into the business
• Less cash in the business to cover your operational expenses
• Not enough money in the bank to pay suppliers, utility providers or payroll costs
• In the worst-case scenario, insufficient cashflow for you to continue trading.

So, what can be done to help improve cashflow?

What can you do to improve your cashflow situation?

For a start, cloud technology and fintech apps can give your business the best possible control over its cash.

Plus, the more informed you are about your cash position, the more you can do to prepare for any cashflow gaps. It’s this foresight that can make all the difference when you’re battling against tough external economic forces and a downturn in sales.

If you want to safeguard your cashflow, these are some sensible steps to take:

Switch to cloud accounting

Accounting and finance technology has moved on in leaps and bounds in the past decade. The latest crop of cloud accounting platforms all offer a detailed reporting of your cash position. These software tools will generally offer real-time data, giving you up to date cash numbers.

Integrate with cashflow forecasting apps

Cloud accounting platforms let you add third party apps to create a custom app stack of helpful business tools. There are plenty of cashflow forecasting apps to choose from, giving you the ability to predict your future cashflow position.

Plan ahead for the cashflow gaps

When your forecast shows a shortfall of cash coming up, that’s the time to take evasive action. If you can see that there’s a cash hole approaching next month, it’s time to look at ways of raising extra finance to fill that hole. That could mean extending your bank overdraft, taking out a small business loan or taking out an invoice finance facility with a lender.

Look for opportunities to cut your overheads

One way to even up your cashflow is to cut down on your expenditure. If you can cut back on overheads, expenses and unnecessary costs, this can help you re-balance your cash position, even when cashflow is getting tight. Look for cheaper suppliers, buy in smaller quantities and take every opportunity to cut costs and keep your spending more sensible.

Update your prices and your sales strategy

Raising your prices is one way to bring in more cash, with the same volume of sales. But it's a balancing act. Putting your prices up can alienate existing customers and could see you losing customers, but if you can find the sweet spot for your pricing AND also drum up more sales, you can quickly increase revenue and give your cash inflows a healthy boost.

Review your cashflow reports regularly

It’s important to look at your cashflow numbers and reporting regularly, not just at period-end. This is particularly important when economic times are tough. With the most current cash information to hand, you can make informed business decisions and aim to keep the business operational.

Talk to us about updating your cashflow processes

With your business in a healthy cashflow position, you give yourself some solid financial foundations for riding out the global recession. No business is invulnerable in these conditions, but with liquid cash in the business, you have more flexibility and more capital to play with.

Book a meeting and let’s see how we can improve your cashflow processes.

Review your expenses - and save yourself money

Running a business will always mean incurring certain expenses or 'spend'.

Whether you’re a large family business or a small fledgling startup, there will be costs, overheads and supplier bills that mount up – and these expenses will gradually chip away at your cash position, making it more difficult to grow and make a profit.

So, what can you do to reduce your spend levels? And what impact will this have on your overall margins, profits and ability to fund the next stage in your business journey?

Getting proactive with your spend management

Spend management is all about getting in control of your expenses – and, where possible, aiming to reduce the level of costs and overheads that you incur as a company.

Why does this matter? 

Well, excessive spending eats into your cash flow, reduces your profit margins and stops you from achieving the profits that you’re capable of as a business.

So if you can get proactive with your spend management, you can actually make your company a far more financially productive enterprise – and that’s great for your overall business health.

So, what can you do to reduce spend and slim down your company expenses?

Here are some key ways to reduce expenses:

Reduce your overheads

Your overheads are the unavoidable costs of running your business, producing your products or supplying your services.

If you have bricks and mortar premises, these overheads will include rental payments, utility bills and even the cost of paying your staff.

Drill down into the numbers and see where there are opportunities to reduce these overhead costs. That could mean moving to smaller premises, or reducing the size of your workforce, to reduce payroll expenditure.

Put limits on staff expenses

If your employees can claim expenses, or buy raw materials and equipment with the company’s money, these costs can soon start to rack up. It’s a good idea to put a spending limit in place, so each staff member can only spend up to an agreed amount.

Having a clear expenses policy helps, as will training up your staff in good spend management techniques. Expenses cards – such as Webexpenses, Soldo or Pleo – allow you to quickly set spend limits, track expenses and pull your expenses data through to your cloud accounting platform for processing.

Look for cheaper suppliers

If you can reduce your supplier costs, this will go a long way to bringing down your overall spend.

If you’ve been with certain key suppliers for years, look around for new quotes, look at current market prices and see if you can negotiate better deals. And if your old suppliers aren’t flexible enough, try swapping to newer, more eager suppliers who will be willing to meet you in the middle on price.

Make your operations leaner

The bigger your operational costs are, the less margin you’ll make on your end products and services.

One way to resolve this is to aim for a ‘lean approach’, paring back your staff, resources and operational complexity to the bare minimum.

By making the business as lean as possible, whilst still delivering the same output, you keep your revenue stable, but reduce the spend level that’s eating into your cost of goods sold (COGS). The smaller your COGS, the more profit you make on each unit or sale – and that means better cash flow, more working capital and bigger profits.

Talk to us about improving your spend management

If you’d like to get in control of your expenses, we’d love to chat.

We’ll review your current costs, run forecasting, and help highlight the key areas where expenses can be cut. Then we’ll help you formulate a proactive spend management programme, to reduce your unnecessary spending.

5 strategies for better cash flow

Managing cash flow effectively is crucial for the health and success of any business. It's about more than just monitoring what comes in and what goes out; it's about strategic planning and timely actions, particularly when it comes to invoicing and managing receivables. 

At First Class Accounts Ovens & Murray and Busy01 Consulting, we understand the challenges businesses face and have proven strategies to help improve cash flow management.

The Foundation: Efficient Invoicing

The cornerstone of maintaining a better cash flow is efficient invoicing practices. 

Invoicing promptly and accurately ensures that your cash flow remains positive, allowing you to cover operational expenses and invest in growth opportunities. 

Utilising tools like Xero’s invoice reminders can significantly enhance your ability to follow up on outstanding payments, encouraging quicker settlements from customers.

Key Strategies 

Maintain Accurate and Current Books

Keeping your financial records up-to-date provides clarity on your financial status, enabling more informed decision-making. Accurate bookkeeping helps in identifying trends, potential shortfalls, and opportunities for improvement.

Firm Credit Control Policies

Establishing and enforcing clear payment terms is essential. While maintaining professionalism and politeness, it's important to be assertive about your payment expectations. Monitoring accounts receivable turnover closely allows for timely interventions, reducing the chances of payment delays.

Simplify Your Accounting Processes

Complexity can be the enemy of efficiency. Simplified accounting practices make it easier to manage your business metrics and maintain a clear view of your financial health. This is where our expertise can be particularly beneficial.

Separate Personal and Business Finances

This is fundamental to gaining a true understanding of your business’s cash flow. Mixing personal and business finances can cloud your view of the business's actual performance and impact your financial decision-making.

Establish a Cash Reserve

A safety net of reserved funds can be a lifesaver during unforeseen financial challenges and also provides the flexibility to seize growth opportunities without the stress of financial constraints.

Actionable Steps to Enhance Your Cash Flow

Start by refining your invoicing process; make it a routine to issue invoices immediately after goods or services are delivered. This sets a professional tone and reduces the payment turnaround time. 

Following the strategies outlined above not only helps in collecting revenue more efficiently but also keeps your finances organised and your business prepared for whatever lies ahead.

How We Can Assist

First Class Accounts Ovens & Murray and Busy01 Consulting are here to guide you through the intricacies of cash flow management. From implementing the appropriate Apps to optimise your invoicing process to implementing effective strategies, our expertise can help you navigate the bookkeeping and cash flow aspects of your business with confidence.

Are you ready to take control of your business? 

Contact us for personalised guidance on bookkeeping, invoicing, cash flow management, and how to keep your business financially healthy. 

We can help you implement the appropriate Apps and practical strategies that align with your business goals. Get in touch today, and let's work together to secure the financial stability of your business.

Holiday cashflow for your business

Whether you’re heading into a holiday period, or just planning to take a break (and congratulations, because a healthy business means work-life balance), it’s important to keep your cashflow under control. This means pre-planning and being proactive.

When you’re not in the office, there are still overheads and salaries that need to be sorted. If taking time off means that less cash will be coming in, it’s essential to plan for this period to make sure that these costs can be comfortably covered. Make sure you have a clear picture of your payroll, and any other planned expenses that will need to be accounted for.

If there’s even a possibility that there could be a shortfall, it’s essential to meet this head-on. Whether this means talking to your supplier or creditors to figure out an arrangement, or compromising on other business outgoings, you must make a plan to ensure that the business, or your staff, won’t suffer.

Tips to minimise the stress of cash-flow over the holiday period

Invoice early

Sending out invoices promptly is your first line of defense. Consider going a step further by offering early payment incentives or exploring retainer agreements with regular clients. This ensures a steady inflow of cash before the holiday rush begins.

Chase payment

Building strong relationships with clients is paramount. Take advantage of this season to initiate open conversations about outstanding payments. A friendly reminder can make a significant difference, fostering goodwill and ensuring your business is on solid financial ground.

Talk to suppliers

A transparent relationship with suppliers is invaluable. Engage in open discussions about your cash-flow concerns and explore the possibility of extending credit terms. Most suppliers appreciate honesty and may be willing to accommodate your needs to maintain a long-term partnership.

Review your costs

Business costs have a tendency to accumulate gradually. Regularly reviewing expenses is a prudent practice irrespective of the holiday season. Take a comprehensive look at subscriptions, regular payments, and upcoming expenses. Identifying areas where costs can be optimised ensures financial stability throughout the year.

Explore alternative approaches

This is an opportune time to reassess your approach to travel, functions, and purchases. Are there cost-effective alternatives or adjustments that can be made without compromising quality? Being flexible and creative in your spending can contribute significantly to maintaining a healthy cash flow.

Talk to the bank or tax department

In times of tight cash flow, initiating early conversations with your bank or tax department is crucial. Discussing potential challenges in advance allows you to explore options, meaning you will have the necessary support to navigate any financial hurdles during the holiday season.

Preparation is key

All businesses need a holistic approach to tackle cash-flow challenges. Develop a comprehensive plan that encompasses all aspects of your financial landscape, from client interactions to supplier relationships and internal cost management.

This time of year can be hard on businesses. By implementing these strategies and staying proactive, you can not only minimise cash-flow challenges but also position your business for success in the coming year.

Christmas gifts for your customers and team

As the festive season approaches, it’s a great time to let your customers and team members know how much you appreciate them. 

In a year that has presented its challenges, when it comes to deciding on Christmas gifts for your customers and team, finding the right balance between generosity and sensitivity is important. It’s not easy to know how much to spend or whether it’s appropriate to throw a party.

Let's explore some Christmas gift ideas that go beyond the traditional, and are appropriate for both your clients and team.

The traditional route: gifts, cards and donations

The traditional approach often involves food-related gifts like hams, hampers, or bottles of wine or spirits. While these can be easily ordered online and delivered, it's essential to consider potential delays and the possibility that recipients might be working remotely. To navigate these challenges, opt for non-perishable items or those with extended shelf life.

For clients who you have a close relationship with, consider personalised gifts that align with their personal interests.  This more personal approach demonstrates your attentiveness and can strengthen your professional relationship. Additionally, a handwritten card adds a personal and cost-effective touch that resonates well during the holiday season.

Another option is a making a donation on behalf of your clients or team members. This adds a meaningful element to your gift-giving as many people really appreciate an email or card that lets them know you’ve donated money to a charity on their behalf. For that extra touch you can include details like, “The local foodbank will use this donation to feed families on Christmas Day.”

Building Stronger Connections: Coffee, Lunch, and Face-to-Face Interaction

Treating high-value clients to a coffee or lunch can be a powerful gesture. This not only allows for a more personal connection but also creates lasting memories. While this approach may involve a higher cost, the impact on client relationships can far exceed that of a traditional gift.

Consider the preferences of your team when deciding on gifts for them. While hampers are a classic choice, it may not be universally preferred. A Christmas bonus is appreciated, but it's essential to consider the tax implications. A supermarket voucher, on the other hand, retains its full value, providing a practical and tax-efficient alternative. Engage with your team to understand their preferences; some may value a paid day off more than a physical gift.

Budgeting for Generosity: Tailoring Gifts Based on Relationships

Working out how much to spend on each client can be challenging. One approach is to categorise clients based on their spending with your business and their overall value to your business.

Consider giving high-value clients more substantial gifts, while smaller clients may receive more modest yet thoughtful tokens of appreciation.

Need help with Christmas budgeting?

If you find yourself wondering how much each client has spent or are unsure about your Christmas gift budget, we're here to assist.

Get in touch with us, and we'll analyse the numbers to provide insights tailored to your business. We'll help make sure your generosity aligns with your financial capabilities, making this festive season memorable for both you and your clients.

Get in touch and we’ll run the numbers to give you the insights you need.

Plain English guide to cashflow

Why is cashflow so central to good financial management? Here's our plain English guide.

What is cashflow?

Cashflow refers to the movement of money into and out of your business over a specific period.

In the most basic terms, cashflow is the process of cash moving out of the business (cash outflows), and cash coming into the business (cash inflows). The ideal scenario is to be in a ‘positive cashflow position’. This means that your inflows outweigh your outflows – i.e. that more cash is coming into the business than is going out.

When you’re cashflow positive, the main benefit is that you have the liquid cash available to fund your daily operations and debt payments etc.

On the flip side, if you’re in a negative cashflow position, this can be a red flag that the business is facing some financial challenges – and that some serious cost-cutting and/or revenue generation is needed.

How does cashflow affect your business?

Not having enough liquid cash is one of the biggest reasons for companies failing. So it’s absolutely vital that you keep on top of your company’s cashflow position.

Five key cashflow areas to focus on will include:

1. Monitoring your cash inflows and outflows – this means regularly tracking your cash inflows from sales, loans and investments, as well as managing your cash outflows from expenses, purchases and debt repayments.
2. Managing your account receivables and payables – efficiently managing your customer receipts and supplier payments helps smooth out your inflows and outflows – and delivers stable cashflow that’s easier to predict and manage.
3. Getting proactive with your budgeting and forecasting – creating realistic cashflow budgets and forecasts helps you predict your future cash position. By anticipating your future cash needs, you can actively plan for potential shortfalls or surpluses.
4. Being in control of your stock inventory – having excess stock in your warehouse ties up cash. So, it’s a good idea to optimise your inventory levels and to only manufacture/order the items you need on a day-to-day basis.
5. Investing in your cash reserves – with emergency cash reserves in the bank, you know you have the funds to handle unforeseen cashflow issues or sustain your operations during lean periods. This makes your whole cashflow position more stable.

How can our firm help you with cashflow management?

Positive cashflow is the beating heart of your business. Working with a good bookkeeper and adviser helps you keep that cashflow healthy, stable and driving your key goals as a company.

We’ll help you keep accurate records, track your inflows and outflows and deliver the best possible cashflow position for the business.

Get in touch to chat about improving your cashflow.