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Read on for our 7 Top Tips to help you take ‘good’ care of your Cashflow!  

Cashflow, the lifeline of your Business, keeping it flowing is critical if you are to succeed, more importantly, survive during these inflationary times, with cost-of-living pressures and higher interest rates eating into profits and for some, viability. 

If you are a small Business you may be already feeling this pain. 

For example, a recent survey found cashflow problems are already affecting two in five small Businesses, with $23,000 owed in unpaid invoices. Additionally, they often relied on personal funds as backup.  

Are you one of those Businesses? 

On that note, Small Businesses are being alerted to the need to stay on top of their Business ‘cashflow’ activities, specifically, debt management, your own and that of your Debtors. Key message, to carefully manage what’s coming in and going out! 

Its been said many times, running a Business, managing finances is challenging but don’t leave it to chance, or wishful thinking. 

Read our 7 Top Tips to help you take 'good' care of your Cashflow:  

1. Avoid overdue payments 

Slow and late payments pose the greatest risk to small Business. In a tight economy, as we are now experiencing, keeping on top of invoicing and receivables is the difference in debt levels, what you are owed. 

Tip: It’s essential to have a streamlined collection model in place, ideally one that prompts and collects payments rather than chasing them as overdue.  

For example, electronic systems can monitor receipts and overdue accounts allowing you to better manage and avoid late payments. These invoicing and billing systems can also generate accounts at point of sale and offer various payment methods, including upfront deposits or advances. Remember you are running a Business that supports you financially. 

An example, where you must outlay for goods, invoice clients prior to making an order rather than tapping into your finances (example, interior decorating). 

2. Pricing margins  

It’s vital to monitor pricing/ profit, margins particularly in the current inflationary cycle. It’s critical to have true-cost pricing, you can’t keep absorbing increases, letting your profit margins be eaten away. Be diligent in keeping watch on this cycle.

Tip: Regularly check the cost of goods and products and determine realistic profit margins by setting prices not too low or too high. Pricing points are needed to keep you competitive and in the red. Offer value for money and your customers will keep coming back! 

3. Cash sources  

Small Business often use personal funds as backup, ‘dipping in’ to stay afloat but that has its own challenges. Mixing sources, personal and Company transactions is fraught with danger, and can easily lead to ‘robbing Peter to pay Paul’! 

Tip: Keep separate ‘finance’ systems and records and avoid ‘borrowing’ from either. Ideally create a reserves Business fund account for emergencies. Keeping separate streams makes it simpler for all concerned including for providing true and accurate Business financial reports, taxes and audits. 

4. High overheads  

How much does it cost to run your Business? That is those costs not directly related to selling your goods, products or services. Utilities, rent and office equipment to name a few examples. 

Tip: Undertake an audit to establish what you have, what is needed, what works and if there are any cost-saving measures that can be introduced. Paperless systems, utility gas & electric efficiencies can be investigated without compromising Business operations.  Investigate vacant, underused space (floor or outdoor). Can it be leased out to generate revenue? 

5. Debts 

Bad debts occur when clients or customers don’t pay their due accounts, going beyond the terms of credit.  

Tip: Help avoid bad debts by reviewing the credit rating of your clients before offering extended credit. Work with new clients to establish ratings and performance before entering credit terms.

Best practice, implement a Debt Management strategy to better monitor and manage accounts. This policy outlines the procedures to follow, making it clear for everyone. If necessary, consider engaging a Debt Management agency. Importantly, remember you are running a Business, your livelihood, don't be caught out with 'fake' excuses or non-responses. 

      6.  Cashflow management  

Cash-in keeps your Business running and the money stream flowing. Operating on hope won’t keep your Business in a healthy state.   

Tip: Set up a Cash Management system that includes budgeting and forecasting, financial planning and ideally automated payment and processing options. These measures can help small Business foresee future obstacles by predicting likely cashflow crunch periods. This allows Business to build up cash buffers in advance. 

      7. Expert Help!  You may feel like you are sinking, along with your Business. Getting on top of accounting, ‘paperwork’ and financial matters can wear you down and at times be overwhelming. 

Tip: Seek professional advice. Contact Blackburn Accounting, we are experienced and ready to help you meet any ‘cashflow’ challenges. We are your Family Business specialists.