Cash Flow Checks for Businesses Are Best Done As Soon As Possible
After the stress of the holiday period and related cashflow issues, there are more times throughout the year that these issues can become a recurring problem that you must get on top of.
Small businesses with cash flow problems put themselves at risk of completely failing or suffering significant financial hardship.
Cash flow provides a business with stability, so they are able to pay employees, avoid loan defaults and pay overheads necessary to keep the business up and running.
Follow these tips to boost your cash flow so you can secure your business’ future.
Perform A Business Health Check
Preparing financial statements will give you an objective insight into the health of your business.
Finding if you have a cash flow problem is the first step to coming up with solutions.
Looking into the following reports will allow you to see if your cash flow is up to scratch.
A balance sheet will tell you what your business is worth on any given day. The value of your business is calculated by subtracting your liabilities from your assets.
Profit loss statements reveal if your income is meeting your expense requirements. If your profit is dipping below your expenses, it is time for a change.
Cash flow reports reveal the money that is going in and out of your business over a set period and show peak and off-peak periods
Use A Business Budget After analysing your cash flow situation, is your cash flow cyclical?
Creating a yearly budget is not only imperative to receive financing in future but will also help you find the best months to save to cover the quieter months. Where applicable, business owners can consider flexible rostering, whereby employing casuals and using a flexible roster can help you cut back on hours when you need to improve your cash flow in quiet periods.
When you have found your quieter periods of the year, try to find other revenue streams for when cash is low. Is there a product or service that could be introduced? Work with your team for new ideas to cover low cash months.
Get On Top of Your Accounts Receivable Putting up with late payers jeopardises your cash flow and can put you in a tight financial spot. Avoid being out of pocket by implementing some of these credit policies:
Collect the debts on time – allowing late payments means that you’re without those funds for longer
Offer an early bird discount to incentivise early repayments – it pays to repay that kindness
Set credit limits and payment terms – know exactly what your terms and conditions are so that you can make sure that those who owe you are abiding by them
Make credit applications and conduct credit checks on all new customers
Penalise late payments with interest – set a specific interest rate that will apply and which you deem as fair.
Consider cutting down on inventory – unsold stock can be a waste of funds, and if you’re finding yourself with plenty of it, you may not need to be ordering as much.
Request upfront payment or a non-refundable deposit where workable, especially when dealing with large orders.
If you’re looking for assistance with invoicing, chasing payments, or a general check-up of your business’s cash flow situation, we are equipped to help. Speak with us to find out what we can do for you.
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