Tag Archives for " cash flow "

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.

Get in control of cashflow

It's an undeniable fact - cashflow is the lifeblood of any business. Without enough liquid funds coming in, it becomes harder to do the basics like trading and paying suppliers. Even worse, a lack of cash can eventually lead to failure for a business. That's why effective cashflow management is so important.

No one likes to think about potential financial disasters, but being proactive with your cashflow can make all the difference when it comes to keeping your business afloat. You need to understand not only where your money is going, but also how you can put yourself in a positive cashflow position so you have enough on hand to cover your expenses.

Fast ways to improve your cashflow

Managing your cash flow is an ongoing process.

Keeping close tabs on the numbers in your regular cash flow statements is key. A negative drawdown could be caused by insufficient sales, unpaid invoices, or not controlling costs effectively.

What's important is to take a complete approach and proactively find ways to improve your company's cash situation.

Some key ways to boost your cash position include:

Make it Easy to Get Paid – Using the Latest in Payment Tech to Speed up Payment Times

Getting paid quickly is essential for maintaining a healthy cash flow. The faster you receive payments from customers, the better off your business will be financially.

To make this happen more effectively, you should use modern payment technologies such as online invoicing software or mobile payment apps that allow customers to pay quickly and securely via their smartphones or computers. This will reduce late payments significantly and give your cash position a boost.

Track and Manage Debts – Chasing Any Late Payments To Reduce Your Aged Debt

Another way of improving your cash position is by tracking any outstanding payments due from customers so that you can start chasing them up promptly if they are late in paying their invoices.

Look into setting up automated reminder systems so that customers are sent reminders when they are overdue on payments. This will help reduce the amount of aged debt in your books which can have an impact on your bottom line.

Manage Spending Effectively – And Start Tracking Reviewing And Reducing Your Costs

There’s no point increasing income if it’s all going out again on unnecessary costs.

It’s important to keep track of where every dollar is going each month so that you can identify any areas where money may be being wasted unnecessarily. Once these areas have been identified, then steps can be taken to reduce these costs so that they don't eat away at any additional profits made by increasing sales or reducing aged debt levels.

Improve Your Sales and Marketing – Creating More Sales and Boosting Income

One of the best ways to increase your cash position is by boosting your sales revenue.

To do this, you need to make sure that your marketing efforts are effective at generating leads and converting them into customers. This means investing in the right marketing strategies such as website design, search engine optimization (SEO), content marketing, social media marketing, email campaigns, etc. You could also consider offering discounts or promotions to encourage customers to purchase from you more regularly.

Talk to us about improving your cashflow.

If cashflow is becoming a headache for your business, we can help you with cashflow forecasting and understanding your cash position to support you attaining that all-important positive cashflow position.

Get in touch to improve your cashflow.

Coping with the skyrocketing cost of living

Whether it’s refilling your petrol tank or paying at the supermarket checkout, the higher cost of living is hitting every household hard.

Across the world, everyday essentials are surging in price, up 7.2% year on year across the OECD. Unfortunately, experts predict that prices will keep rising for at least the rest of the year.

What can you do to try to keep up with the increasing cost of living?

Here are our 12 top tips

Look for ways to earn more

• Grow your business’s profitability (talk to us about improving your profits) or ask for a pay rise.
• Take in a boarder or flatmate.
• Sell your unwanted items online.

Cut back where you can

• Prepare more meals at home and spend less at cafés and restaurants.
• Create a budget and keep your spending under control.
• Reduce the amount of meat you buy.

Find ways to use your car less.

• Cancel your credit cards and your buy now pay later accounts.
• Review all your ongoing expenses like utilities, insurance and subscriptions – cancel, switch providers or get better deals.

Invest in your future

• Think about investing in ways that are likely to outperform inflation – both shares and the property market have historically provided returns higher than inflation.
• Start a new business, launch a new product or service, or try a side hustle.
• Teach yourself about money and finances using free tools online and books from the library. Better money management will help you make the most of what you’ve got.

If prices rise by 7% this year, it won’t be easy to increase your income by the same amount. But if you can increase your income by 5%, then make up the rest through savings, while also investing for the future, you can still come out on top once inflation settles down and prices stabilise.

Worried about budgeting, cash flow or forecasting?

Talk to us. We have years of experience through many economic cycles, including previous periods of high inflation – and we’re always here to help.

Chasing Invoices

When you’re a small business owner, sole trader or freelancer, chasing invoices and asking for payment on overdue invoices can be a delicate matter.

Without an accounts person or department, sometimes you’re trying to secure new work and chase invoices from the same person. That can be an awkward tightrope to walk.

Here are five tips for chasing payments while maintaining customer loyalty:

Automate reminders

Set friendly payment reminders that go out automatically – they tell clients they’re missed a payment without making it personal. It’s like your invoicing platform is giving them a nudge, rather than you doing it yourself. You can sign it off with just your business name, rather than your own.

Find out who’s behind the payments

Is there another person at the business who’s in charge of accounts or payments? Ideally, you want to be selling your services to your usual contact and chasing someone else to pay your invoices.

Enlist help from a friend

If you have a friend who also has a small business, become each other’s accounts support. Set your friend up with an ‘accounts@yourwebsite.com’ address and they can send out email reminders and follow-ups to your clients, or call them about the invoice. Maybe you can do the same for them.

Set expectations when you negotiate the job

Firm and clear payment terms make it easier to get paid faster and keep that cash flowing.

Set out your terms up front – it’s much easier to talk about your payment expectations when you organise the job, rather than once the invoice has been sent.

For persistently slow payers, consider offering an early payment discount or ask for more money upfront for the next job.

Be nice, but firm

There’s no need to be rude or aggressive to your clients when chasing payment; you want to maintain a positive relationship.

However, at some point you need to cut off their credit. Often saying ‘I’m very happy to do that for you, just waiting on payment of that last invoice’ will give them the impetus they need to pay you.

But if they persistently don’t pay, no matter how much you like the client, you’re not providing a free service! Stop working for the client and chase those outstanding invoices more assertively.

If you need help managing your outstanding invoices, get in touch for expert support and guidance.

Keeping your business cash liquid – the difference between cashflow and profit

The foundational goal of any business is to make a profit.

As a business owner, that’s one of your key financial aims – to make enough sales, at a big enough margin, to generate profit from your enterprise.

But how does profit differ from cashflow? And why is cash king?

How do profit and cashflow differ?

To really understand the difference between generating profit and managing cashflow, we need to look at what both these terms mean. You might think that delving into the accounts is a job for your adviser, but being in control of your profit and cashflow is an invaluable business skill.

Let’s take a look at the differences:

What is profit? 

Profit is the surplus that’s left from your income once you’ve paid your expenses, supplier bills and tax etc. It's driven by creating a profit margin and generating value from your products and/or services.

What is cashflow? 

Cashflow is the ongoing process of ensuring that the business has the available cash (or ‘liquid’ cash) needed to operate. This provides the money needed to trade, to pay suppliers, to cover wages or to buy raw materials etc.

Why is positive cashflow so important?

‘Cash is king!’ may be a cliche these days, but it’s a maxim which underpins any successful business model. Yes, it’s great to make a profit at year-end, but if you don’t look after your cashflow then the business may not survive as long as the end of the year.

What’s needed is good cashflow management to enhance your financial health. And without a careful eye on your cash numbers, things can quickly go awry.

A business can generate high revenues and big profits, but still be cashflow poor. In other words, it can have profits at the end of the period, but have very little liquid cash to fund it's day-to-day operations over the course of the period.

Talk to us about improving your cashflow management.

Good cashflow management is all about being in control of your cash inflows (income you’re generating) and your cash outflows (what you’re spending). To achieve ‘positive cashflow’ you need to proactively work to keep your inflows higher than your outflows.

As your bookkeeper and BAS Agent, we’ll help you set up detailed cashflow reporting and forecasting, so you can keep the business in that ideal positive cashflow position. And we’ll also look at key steps for keeping your revenues high, margins profitable and meeting your financial targets.

Get in touch to talk through your cashflow management.

ATO Line of credit ending

As new reporting powers come into play, businesses are being warned against using the ATO as an alternative line of credit.

Debt Reporting Powers

In 2019, the ATO was afforded new debt reporting powers. While this took a backseat to the Covid-19 pandemic, the ATO is now cracking down on outstanding tax debt. 

Businesses without a payment plan, that are more than 90 days in arrears, and who owe more than $100,000 in tax are more likely to be reported to credit agencies by the ATO.

Impact on credit rating

In the past, business owners have sometimes used the ATO like a ‘line of credit’ by not paying their ATO commitments on time.

Taking this road is much more likely to have an adverse impact on your credit ratings and credit insurance limits. This, in turn, makes it more difficult to maintain or extend credit terms with suppliers.

Therefore, it's important to maintain a high level of communication with your creditors. 

Staying on the front foot

As business owners, if you owe tax, it's vital that you stay on the front foot with this ATO crackdown. We suggest you seek the advice of your BAS agent.

First Class Accounts Ovens and Murray, as your BAS Agent, are able to advocate on your behalf to deal with the ATO.

As Busy01 Consulting, we can also to assist with:

• preparing a business plan
• management advice
• cash-flow planning and projection
• systems development
• business expansion
• budget development
• trading-structure planning.

Get in touch to discuss which options are best for your business. 

Keeping debt low

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. So, it’s important to tackle late payment head on.

Get effective with your credit control

Being proactive with your 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:

• Make your payment terms clear – state your payment terms on all invoices and create a policy that’s part of the terms & conditions that customers sign up to.
• Run regular debtor reports – check your list of late invoices to see which customers are the late payers, and where the big debts are that need to be collected.
• Be proactive in chasing late payment – don’t be shy about asking a customer to pay their bill. Set up notifications and schedules to remind yourself to chase late-payers.
• Automate your credit control tasks – cloud accounting platforms have built-in tools or automated credit control integrations that can automatically chase your late-paying customers as soon as an invoice is overdue.

Talk to us about enhancing your credit control

If late payment and aged debt is weighing heavily on your balance sheet, we’ll help you set up the debtor reports and credit control processes needed to reduce this debt.

Get in touch to improve your credit control.

How do you get your outstanding invoices paid?

Do you dread following up outstanding invoices?

It can be frustrating when you have customers who haven’t paid their invoices. Not to mention the impact on your cash flow.

Getting paid on time is essential to good cash flow. But how do you get paid?

Here are some simple, effective techniques that can help you get your outstanding invoices paid.

Make sure your terms are clear

Write into your terms of service that you will charge a late fee for overdue invoices. Make sure you your customers are aware of your terms of service before you do the work.

Also, we recommend doing a credit check before you do business with a new customer. This can help reduce the risk of late payments and defaults, as well as minimising the need for follow-ups.

Reminders

Often, the payment is a simple oversight. By resending the invoice or sending a simple payment request an outstanding invoice will be paid. Start there, and you might be surprised by how many outstanding invoices are paid.

Better still, set your accounting software up to send automated reminders to customers with outstanding invoices. Talk to us about how to do this.

If the above action doesn’t achieve the desired result, ie your outstanding invoice being paid, it’s time for firmer action.

As uncomfortable as it can be to make a phone call to ask for payment, it can be one of the most effective ways to get paid. Perhaps start with asking are they aware that their invoice is outstanding.

A stronger stance

So, what do you do if your customers don’t respond to your polite requests?

If you have been waiting for payment for months, it’s time take a stronger stance.

This could include:

• stopping your services until payment is made
• using a professional debt collector
• bringing in your lawyer

While you will likely get paid by taking this stronger stance, you do need to consider the potential impact on the relationship with your client. How important is it? Do you want to continue to do business with them? Is it worthwhile continuing to do business with them? 

If you need help managing your outstanding invoices, get in touch for expert support and guidance.