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.

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.

Keeping your cashflow strong in tough times

Small businesses are particularly vulnerable in tough economic times.

When sales are slow, there are still overheads and salaries that need to be sorted.

At First Class Accounts Ovens and Murray, we understand that the key to staying afloat and continuing to thrive during this time is pre-planning and forward thinking.

Here are some tips to help your business thrive in these difficult times:

Get a clear picture of your payroll and planned expenses

It's important to have a detailed understanding of your business's expenses so that you can plan for any potential shortfalls.

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.

By forecasting and budgeting meticulously, you'll be able to better understand how you're placed to weather financial strains if or when they arise.

Invoice early

Sending invoices as soon as possible and in advance can help you receive payments sooner. By proactively billing your clients or customers, you increase the chances of receiving payment promptly. Offering a retainer or similar deal to regular clients or customers can also encourage them to book services or make purchases in advance, providing you with a cash flow boost.

Chase payment 

It's essential to follow up on any outstanding payments during tough times. Maintain strong communication with your clients and proactively remind them about their unpaid invoices. By initiating conversations and expressing the importance of timely payment, you can encourage clients to settle their dues promptly. Read 6 secrets to getting prompt payment here.

Talk to suppliers

A little honesty can go a long way. Being honest with your suppliers about your financial situation can lead to more flexible arrangements. Openly communicate with them and explore the possibility of extending a line of credit or negotiating alternative payment terms. Suppliers who value an ongoing business relationship may be willing to work with you to find mutually beneficial solutions.

Review Inventory

Evaluating your inventory can help identify potential cost-saving measures. Look for local suppliers who may offer cheaper alternatives, reducing shipping costs. Additionally, consider discussing alternative products with your suppliers that could help you lower expenses without compromising the quality or value you offer to your customers.

Review your costs

It’s also a good idea to do a general review of expenses. Business costs can creep up, and it’s a great idea to make a time to check on your expenses regularly, no matter what your financial situation. Review all of your regular payments and subscriptions as well as upcoming costs. There may be travel, functions or purchases which you can decide on an alternative approach to.

Talk to the bank or tax department

If you're experiencing tight cash flow, it's important to initiate early conversations with your bank and tax department. By discussing your situation, you can explore available options for financial assistance, such as credit facilities or tax payment extensions. Proactive communication allows you to put necessary arrangements in place and ensures you have the support needed to navigate challenging times.

Need help? 

We can help you implement strategies to protect your business for the long terms and help you alleviate cashflow worries.  Get in touch.

Making the most of digital and cloud

Transforming into a digital business sets the best possible infrastructure for your future growth. And, as your business scales, the benefits of going digital will start to become obvious.

Running your key business processes in the cloud and using the latest digital software and apps adds to both your efficiency and your productivity. And, most importantly, digital systems are designed to scale with you as your enterprise grows and the need for resources increases.

Here are some of the big reasons for taking the plunge and diving into digital.

Automate your key manual process to increase efficiency

A scalable business has to systemise its processes and procedures. If your business model is still tied to manual processes and a system that only exists in the owner’s head, you’ll eventually come up against a capacity brick wall. Systemising and automating your processes is a fundamental step when you make the jump to digital.

Look at every internal and external step in your operations and write down how these systems work. Note down each task, who actions what and how the whole system links in with the next step in your operational chain. If there are opportunities to automate a step, automate it. Many business apps now include artificial intelligence (AI) or automation features that can chase up unpaid invoices, send automated replies to customers in live chats, or take automatic payments etc.

Work in the cloud to stay more connected

Since the start of the 2020 pandemic, the world has seen a quantum shift to remote working – and that’s only been possible because of cloud technology. Instead of working from local applications on our laptops or office-based servers, most tech-savvy businesses now use cloud-based apps that are accessible anywhere you have an internet connection.

Switching to cloud-based systems is a game-changer. You and your team are no longer tied to a physical office and can be productive from any WiFi-enabled location. That could be your home, your customer’s warehouse, your regional office or your local coffee shop.

And the benefits aren’t just limited to remote working.

With your applications and databases in the cloud, you can access customer information, sales data or financial numbers wherever you happen to be. Everything is securely backed up and available at the press of a button – that’s an invaluable benefit if you want to be flexible, connected and scalable as a business.

Create your own custom app stack

Your business systems and software no longer have to remain static and based on the office server. By combining a business and accounting platform like Xero with your own choice of business apps, you can create a truly tailored ‘app stack’.

Apps use an API (application programming interface) to connect with each other, share data and form a larger business system. This can include apps to:

• Manage and automate your bookkeeping and accounting tasks
• Send out e-invoices to your customers to speed up payments
• Take automated payments and reconcile your transactions
• Automatically chase late-paying customers and carry out credit control duties
• Project manage your operations and provide detailed reporting
• Manage your job utilisation and time spend on each project
• Keep a detailed real-time inventory of your products
• Send out marketing campaigns and social media posts to your audience
• Interact more closely with your end customers and learn their habits

Talk to us about implementing the appropriate app stack into your business.

Record and track your business data

App integrations and a customer app stack don’t just improve your productivity. Because your apps are connected via APIs and are sharing your business data, you also have access to a wealth of data, information and reporting features.

Look in detail at your cashflow, expenses and spending to improve your cash position. Take a deep dive into your sales and marketing information to find out who your best (and most profitable) customers are.

Run projections and ‘What if…’ scenarios, based on your historical data to forecast the future path of the business. There are plenty of ways to make use of this bountiful data to help you review, understand and improve your performance as a company.

Make better-informed business decisions

A business in the pre-computer age would have had very little information on which to base its decision-making. Annual accounts, cashflow statements and some basic management information would have been available, but there was very little real-time data to refer to.

In the digital age, you can literally see every aspect of your company’s performance in real-time – and, in some cases, in the future as well. That’s a game-changer in so many ways, and something every business owner should be using to improve strategy, financial management, customer experience and business decision-making.

To summarise, a digital business:

• Creates systems that are integrated and connected
• Shares and records all your business data
• Reviews, analyses and finds insights in your business information
• Connects with your customers in more meaningful ways
• Makes better-informed business decisions, as a result.
  
  

Making the most of business data

Are you recording, measuring and analysing enough of the data being generated by your business?

With so many apps and digital solutions now available to businesses, there's a wealth of useful data to trawl through – and plenty of hidden insights for you to benefit from.

Here are 5 ways to get more insights from your business data

1. Track your business finances

Managing your business accounts used to be something you left to your finance director. But with cloud accounting now the norm, every business now has 24/7 online access to detailed information about its financial position and performance. Deeper analysis and insights are usually available at the click of a button, helping you spot the pitfalls and potential opportunities.

Your accounting platform can show you:

• Profit & loss reports and balance sheets, with real-time data to help decision-making
• Cashflow forecasts and projections, to help plan your future cash position
• Budget tracking and spending reports, to stay in full control of your expenditure.

2. Review your credit score

The credit risk rating your company is given by the big credit agencies can have a huge impact on your ability to borrow. A high risk-rating will mean that banks and other lenders will be reluctant to offer you funding. And suppliers will be less open to offering you trade credit.

Some credit bureaus, like Experian, now offer ways to check your business credit score. With a better understanding of your credit data, you can take action to improve your score.

To get in control of your credit position, you should:

• Find out your current credit score and how this is impacting on your ability to borrow
• Check out your payment history and take action to improve performance
• Regularly check this credit data to track improvements or drops in your score.

3. Monitor your sales and marketing data

Steady sales revenues are a must for any business that wants to grow, but how much oversight do you have over your historic and future sales data? Using a sales and marketing platform like Salesforce helps you track your sales, campaigns and customer relationships – giving you a goldmine of data to sift through and analyse:

Key data areas to analyse will include:

• Which products and/or services are making the most sales, and why
• Which customer demographic is the biggest spender, and why they’re advocates
• Which campaigns are delivering the best return on investment (ROI).

4. Track your staff performance

Your people are one of the company’s most important assets. But do you really know how well your employees are performing, or how engaged they are with the goals of the business? Today’s HR software makes it easy to set core skills and capabilities and track how each team member is performing over the course of the year.

As an employer, you can:

• Set performance and training targets, and see how your employees are tracking
• Run satisfaction surveys and staff feedback to check in on team engagement
• Use your data to drive improved performance and happiness in your workforce.

5. Measure your performance against targets

One of the big benefits of tracking your business data is the ability to measure your performance against a given target. Whether it’s a budget target for a new department, or a sales target for a new marketing campaign, you have the performance data at your fingertips. This helps you motivate the team, work towards a common goal and ‘gamify’ your progress as a business.

If you share these targets and performance data with your people at monthly team meetings, this transparency can work wonders for motivation. When your employees, management team and executive team are all aiming for the same goals, you’re a more effective team.

Talk to us about getting more from your data.

Transforming your company into a digital business may seem like the end of the process. But the reality is that getting in control of your data sharing, analytics and performance tracking is the genuine goal for any ambitious business in 2023.

We can help you connect up your app stack and focus on analysing the most important data for business success.

Check Your Business Performance Against the ATO Small Business Benchmarks

Are you interested in comparing your business performance against the ATO Small business benchmarks? It can be a useful exercise to see whether your business is performing well, on average, or lower than the benchmark figures.

Each year the ATO publishes industry-based data to highlight specific ratios of financial and other types of performance.

For example, you can compare your cost of sales to turnover, total expenses to turnover, or labour cost to turnover. Comparing to average data gives you an idea of how your business performs compared to others in your industry.

It's no problem if your ratios are different – but it can be a helpful starting place to look if you want to improve financial performance or reduce costs. If your ratios are very different from the ATO’s, then it could be worth diving deeper into your financial reports to see if you have problems that can be addressed. For example, a hospitality business might realise that its food cost is much higher than average and then take action to change suppliers and manage wastage.

The ATO benchmarks are based on your business industry code used in your activity statements and tax returns. If you’re not sure what industry you fall under, check the ATO Business industry code tool to find the correct code for your business.

To start comparing your business, you’ll need some information from your accounting software financial reports.

• Gross sales income
• Salary and wages expenses, including superannuation
• Vehicle expenses
• Interest on credit cards and loans
• Cost of sales
• Total other business expenses, including all running costs, administration, contractors, suppliers, rent, freight, training and website fees.

Once you have these totals, either from your software or your last tax return, you can compare your figures to the ATO benchmarks. Compare your business here.

Want to learn more? We can run the numbers for comparison information and then discuss areas you can target to increase profitability, reduce costs and streamline operations. Talk to us today.

Meeting your goals during a global slowdown

Optimism among business owners was high coming into 2022. But a number of factors are now making things a lot more challenging:

• Global events are pushing up energy prices to astronomical levels.
• Ongoing supply-chain issues are making it difficult to source raw materials.
• A scarcity of talent is causing problems when it comes to staffing and hiring.
• Covid is still around and making trading more complex and difficult.

Faced with these hurdles, you might feel that your goals are no longer attainable. But is this true? Growth is likely to be a challenge, but not impossible.

5 steps for meeting your goals during a slowdown

Moving forward during a period of economic recession is certainly more of a challenge. But what's needed is an updated plan with awareness of the major external threats.

Here are five steps to set you on the right path:

1. Revisit your goals and see how realistic they are

Look at the numbers and make a call on whether they still make sense in the current business market. If necessary, update your goals and make them challenging. But, importantly, make any goals attainable during a time when cash and resources are in short supply.

2. Get the best possible understanding of your financial position

Take a deep-dive into your finances and see how you’re tracking against your budgets and targets. How is your cashflow looking? Do you have enough working capital to fund your growth? If additional funding is needed, where could it come from?

3. Decide if you have the right team for the job

Whatever your key goals, you need talented people on board who share your core aims for the business. Think about whether you have the team you need, or if there’s a pressing need to hire new people. And consider if artificial intelligence (AI) and automation could fill some of the resourcing gaps and help you scale up.

4. Assess the current situation in your sector

You can’t change the big external threats in your industry. But you can do your homework and find out what the immediate threats will be. Are there supply chain issues? Are prices going sky high? Get up to speed and look for ways to minimise the impact and rise to the top of the crop.

5. Update your plan

Once you’ve looked over your numbers, goals and strategy, you’re likely to need an updated business plan. Factor in the threats, set meaningful goals, but give your company a target that’s realistic during a global slowdown. Successful small steps towards a goal are better than one giant leap; a leap where you may land flat on your face.

Getting prepared

The sooner you start revisiting your goals and business plan, the better prepared your company will be for the ups and downs of a recession.

Come and talk to us about your financial position, your core strategy and your concerns about the next six to twelve months. We’ll help you set practical, attainable goals that will push your business forward.

Is your business attracting the right talent?

We all know that business owners are finding it challenging to find good people to join your team.

Have you considered what your employer brand says about your business?

Your employer brand is like the tone of voice for your business. It should reflect you and what makes it unique, while also attracting people who want to work there too!

The right employees are a business’ most valuable resource. With the changing needs of industry, it's important to have an attractive brand that will attract those with skills relevant for your company - and keep them around longer than before!

So how are you attracting great talent to your business?

Start with sharing the full picture

To get good people, you need to tell them what your company is like.

This includes talking about the work environment and company culture. You can do this by describing your work environment in job descriptions. Including that on your website or social media.

Also make sure your careers page has more information about your company, the culture, and the roles available.

And it helps if you can also provide some insight into company life and why your people currently work for you.

Know your Employer Value Proposition

Your Employer Value Proposition (EVP) is what makes your company different from others and attractive to potential employees.

Your EVP includes things like your company's values, offerings, and associations.

Having a strong EVP makes it more likely that people will want to work for you, and it can also help reduce turnover if current employees feel aligned with your company culture.

Attracting the right talent

When it comes to attracting the right talent, you need to first understand who your ideal candidate is. Build a profile of your ideal candidate by thinking about their:

• Work experience
• Aspirations and goals
• Values
• Education
• Personal activities
• Personal life and family situation.

Then, create questions to ask potential employees to see if they fit your ideal person. You can also tailor your advertising based on the profile you develop to attract the right candidates.

Plan for the future

What positions do you need to fill in the next 6-12 months, and what skills are required for each?

Build relationships with potential candidates now. This will take time, but it will be worth it.

Make your company an attractive place to work by investing in your employer brand. This includes things like culture, environment, values, and strategic vision.

Doing this will help you save money on recruiting costs and reduce the number of employees who quit.