Adopt these 'healthy' practices to get your cash flowing:
- Profit margins: with the current ever-increasing costs of doing business, it’s critical to have true-cost pricing. Don’t let your profit margins be eaten away.
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!
- Overdue payments - monies due to you: Slow and late payments pose the greatest risk to small Business. Cash in keeps the money flow flowing, without it the cash river dries up!
Tip: Have an efficient invoicing and billing system in place, one that generates accounts at point of sale and offers various payment methods. Electronic systems can also monitor receipts and overdue accounts allowing you to better manage and avoid late payments. Keep on top of your debtor's ledger, remember you are running a Business, it's your livelihood.
- Personal and Business financial matters: Mixing money, personal and Company transactions is fraught with danger, including relationship friction and can easily lead to ‘robbing Peter to pay Paul’!
Tip: Keep separate systems and records and avoid ‘borrowing’ from either. Makes it simpler for all concerned including for providing true and accurate Business financial reports, taxes and audits.
- 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!
- Bad debts: These 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. Introduce a Debt Management strategy to better monitor accounts and take necessary action as required.
- Excess Stock: How often do you review your stores? Are you holding too much, including old, discontinued or slow selling items.
Tip: Take stock of your all reserves. Consider offering discounts for bulk orders, or use online promotions, such as auctions to clear stock. Monitor sales and undertake regular inventory stock-takes to keep on top of stores.
7. Cashflow Management: Proactive Financial Management is key to keeping your Business in a healthy viable state. Hoping things will solve themselves isn’t the answer.
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.
8. Feel like your Business is sinking: Running a Business, getting on top of financial matters can wear you down and at times be overwhelming. But there are solutions and help at hand.
Tip: Seek professional advice. Contact Blackburn Accounting, we are experienced and ready to help you meet the challenges and address your Cashflow problems! We offer personalised accounting, taxation minimisation and can assist with strategic planning.