Adam Abela, CEO of Float Accounting, gives 5 cashflow management tips you can implement to improve your business’ cash flow straight away.
[00:00:00] Let’s talk about 5 easy cashflow management tips that we can implement that hopefully have a positive effect on your business straight away.
Hi everybody. Yes, I know; cashflow management discussions are not the most interesting of subjects and I’ve even seen them cause anxiety amongst some business owners. But today let’s talk briefly about some tips that can really, really help small businesses that may be experiencing some cashflow issues. Now, these tips are really, really good, you can implement them if you’re a small or medium-sized business, and most of them can be implemented straight away.
I’m sure we’ve all heard that cash is king, and that really is true when we’re talking about cashflow management and having healthy access to cash in our business. I see so many businesses that come through that have a really, really good business model, a really, really good business structure, they’re generating revenue, but they’re getting suffocated because the business is not generating the cash that they need. And we know that the cash flow is the air, the oxygen to the business.
Cashflow Management Tips:
1) Have an efficient receivables process
[00:00:55] As in my previous video regarding processes, I discussed how important process is, and implementing process in your business is, and this is even more important when it comes to cash flow. So, ensuring that you’ve, that you’re setting up and you have an internal process that outlines every touchpoint, every escalation point of getting paid and making sure that your business is not letting unpaid invoices accumulate.
So, every business should have a clear, defined process for receivables, work that’s been done that hasn’t been paid. There should be clear escalation points for those invoices that are overdue. We shouldn’t be making these things up on the fly, it should be well thought out. There should be a framework and an outline as to what’s going to happen to make sure that this work that we’re generating, we’re actually getting paid for.
2) Get an overdraft facility
[00:01:43] Number 2: overdraft facility. Now, this is one of those things where it doesn’t seem important until you need it. And unfortunately, it’s not one of those things that when you’re in a pickle, you can just sit up straight away. It needs to be thought out. It needs to be implemented prior to the issue arising. The good news is, is it doesn’t take too much time to set up, and it’s something that you should be able to go to the bank and set up pretty much straight away.
This is really, really important, particularly when you’ve got timing differences in your expenses and your revenue coming in. For example, you might have some expenses that come through a week before wages are due and those expenses have hit your account and you now need to pay $8K, $10K, $15k worth of wages.
If you have an overdraft facility, you know that you’ve got that little bit of fallback, to pay that because you know that you’re going to get revenue in a short amount of time and you’re going to be okay.
3) Make sure you have reliable payment terms
[00:02:33] This is one that I see so often. Businesses that don’t have well-thought-out payment terms for their product or their service. For example, tradesmen who don’t have any deposit or any milestone payments in their business. They’re paying for materials up front, and the customer is late in paying. So it’s really, really important that we come up with payment terms that are both fair to the customer but do not leave your business exposed to huge amounts of risk. Because I know that tradesmen, for example, are always busy, so it is difficult then to have to chase up customers that are not paying.
One really, really good piece of advice is, to get a good contract solicitor in your business, and build that relationship and have those discussions before a problem arises so that when a problem does arise, it’s not causing you anxiety to go out and have to find a solicitor now and have to build a relationship; do that all beforehand, so if in the unfortunate event that you do come across someone who’s causing you problems, not sticking to your contract or not paying you when you should be, then you’ve got somewhere to go quickly.
4) Rent or lease rather than outright purchase
[00:03:36] As I mentioned at the onset, cash is king, so leasing or renting may be a really, really good option for you, instead of paying cash for certain capital in your business or machinery or whatever it might be. Always remember, cash reserves are great to have in business. There are really, really good products out in the market now, for example, the rent to buy structure, which is really prevalent in some sectors, might be worth having a look at. We’ve used them previously and they’ve worked really well for us in previous businesses. And always remember, yes, there is an interest component to it, but your interest can be tax-deductible.
5) Leverage dashboards in your business
[00:04:10] Good cash flow really does come down to a simple rule: spending less money in a period of time than you’re making for that same period or building cash reserves in your business. I know that sounds easy, but when you have time moving expenses, then keeping track can be very stressful and time-consuming.
That’s why having good solid dashboards in your business can be extremely helpful. They are live, they can plug straight into Xero, they give you immediate insights into your cash flow. They can even project your cash flow. So, they’re really, really good to have, we do that all the time for businesses, so if that’s something that you would find helpful, please reach out to us.
So, thank you so much, really appreciate the time. Really hope that that’s helped, and if there’s anything that we can do for you, please reach out, take care and we’ll chat soon.The information contained in this publication is for general information purposes only, and does not take into consideration your individual circumstances. You should obtain personalised professional advice before acting upon any information contained herein. To the maximum extent permitted by law, we accept no responsibility for any loss incurred by any person directly or indirectly due to any action taken or refrained from as a consequence of the contents of this publication.