There’s no doubt that this time of year is busy. Wherever you look, businesses are ramping up for the end of year. And at no other time is cash flow a more significant distraction than now.
Cash flow is the lifeblood of any business. However, recent research indicates only 54.2% of Australian small businesses are cash flow positive, and one of the main reasons businesses seek finance is to maintain short-term cash flow.
We reveal 12 cash flow tips to ensure your business stays in the green.
What is positive cash flow?
Where cash coming into the business is greater than cash going out during the same period.
1. Get invoices out – promptly
At this time of year, it’s even more important than ever to stay on top of paperwork. Creating a regular schedule for sending out invoices will help, but there are plenty of small business Cloud-based accounting software options to automate the process and take the headache out of invoicing.
2. Chase up invoices – promptly
Everyone’s distracted at this time of year. Avoid late payments by sending payment reminders for unpaid invoices a few days before they’re due. Chase up overdue invoices at regular intervals, and use a combination of email and phone calls for best results.
3. Consider new payment options
End of year can be super busy, so now’s a great time to take the extra stress off your customers by making it as easy as possible to pay you. Check out payment options like eWAY, Stripe and other payment gateways that allow you to set up online invoice payments. Plus, talk to your bank about mobile payment systems for businesses on the go.
4. Be clear about payment terms
Your customers will appreciate it if you are up front about your payment terms – it’s something less for them to worry about at this time of year. Just make sure the terms suit your business too – that’s the most important thing.
5. Avoid impulse buys
Ignore the temptation to buy something for the business just because you see it on ‘sale’. It might be tempting, but you need to think through how the purchase will impact your business costs for the month and whether it will contribute to boosting your bottom line in the longer term.
6. Take stock
Are you holding too much stock? Is it just taking up space? This time of year offers a great opportunity to get out the sale signs and start clearing excess product. You’ll get an instant cash boost and may even save money if you’re paying for storage space.
7. Review overheads
As the popular saying goes, “A penny saved is a penny earned.” End of year is a perfect time to review your business costs – subscriptions, insurance and supplier costs can often be reduced by investigating your options.
8. Review pricing
New year is the perfect time to review your pricing structure to ensure you’re not undercharging. You could also consider ways to repackage your goods or services to charge a little more.
9. Keep marketing
Even though the cash may be flowing in, you still need to focus on filling that pipeline of business to avoid a future cash flow crisis. As the year draws to a close, it’s good to set time aside to work on your marketing and business strategies. Where do you see yourself in 2019 and how will you get there? Make a plan.
10. Understand cash flow
Do you understand and monitor your business cash flow? If you don’t, now’s a good time to start. Accounting software can be a big help here, allowing you to see, at a glance, your cash flow position. Make 2019 a cash flow positive year.
11. Create a cash flow plan
Being prepared for seasonal ups and downs and one-off costs can really help avoid stressful situations, and the best way to do that is by creating business and cash flow plans. Forecasting cash flow can help you stay on track and reach your goals. So plan ahead and stay on top of cash flow in 2019.
12. Get help
Cash flow gaps are common at this time of year, so if you look like you could come up against it, don’t stick your head in the sand. Talk to your accountant or bookkeeper, they are experts in cash flow management and can help you turn things around before it gets out of hand. There’s no harm in getting some advice, and it may save a headache or two.