Adopt these 'healthy' practices to get your cash flowing:  

1. 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! 

2. 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.  

3. 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. 

The tell-tale warning signs of trouble are there, but perhaps you don’t see them or more critically you ignore them. Either way, if you don’t take action to remedy the situation your Business will suffer, be severely damaged and even fail.  

The 4 warning signs of trouble include: 

1. Poor cashflow 

2. Weakening financial position 

3. Not keeping up with compliance obligations 

4. Changes in customer behaviour 

1. Poor Cash Flow 

Signs such as, 

• You have a cash deficit, or you are unaware of your cashflow position 

• Creditor/customer payments are late or irregular 

• Payments to suppliers are unreliable or you struggle to pay 

• Profits are low despite a healthy turnover rate 

What you can do, possible remedies. 

Starts with improving your cashflow management and starts with the following steps; 

• Set up a cashflow forecast and closely monitor it 

• Chase up late payments and any monies owed to you 

• Establish/review Terms & Conditions for Customer payments & credit 

• Review your operating costs across all areas to find opportunities to reduce outgoings 

• Seek expert advice from an experienced Accountant. Blackburn Accounting your family Business Specialists, offers a broad range of personalized professional services.  Act now, contact the Team today. 

2. Weakening Financial Position 

The crux of the matter, simply said, without sufficient funds your Business will no longer be able to continue operating or trading. 

Warning signs include

Are you struggling with the challenges of managing your cashflow?

You are not alone, with a recent survey revealing, ‘nearly 80% of small to medium Businesses have experienced a lack of cashflow in the past 12months.’ Many, a quarter, survived by not paying themselves a salary or dipping into personal savings.   

Yes, running a successful Business isn’t easy, it takes courage and a range of skills to stay on top of things. It's weathering the ‘storms’, complexities and demands of everyday operations, including customer relations, Suppliers, and sales! Sound familiar! 

The key to success is Cashflow, the amount of money going in and out of your Business.  In today’s trading environment this flow has never been more important, vital if you are to remain financially stable.  

To tackle cashflow challenges Businesses need to adopt 'sound' business strategies to keep the cash flowing now and to be better prepared for future challenges.   

Firstly, let’s look at Cashflow, what it is and how it impacts your Business  

Cash flowing-in is usually the money you get from sales but can also include sale of assets, grants or money from debt repayments. 

Your outgoings include; wages, rent, maintenance, payments to suppliers and loan repayments. 

Common flow causes include: 

Declining revenue, inaccurate forecasting, low profit margins, lengthy payment terms and supply chain issues. Examples include; 

• High overhead expenses: Having high administrative costs that support company functions but don't generate funds returns eg rent increases due to inflation 

• Expensive debt: poor debt management practices or taking on too much debt or extending credit card debts

• Inadequate cash reserves: little or no backup cash on hand to cover emergencies and lean periods  

• Seasonal fluctuations: Having seasonal highs and lows in sales, which can lead to extra costs like hiring more staff or buying more stock 

• Excess inventory: Having excess stock reserves you can't sell, which ties up cash  

• Decreasing sales: Selling products or services at low prices or offering discounts that reduce profit margins  

• Slow payments: Receiving late or slow payments from customers, which means you've already paid for production but haven't been paid yet. 
• Capital Expenditure: Upcoming fitout or new office fitout costs and new machinery acquisition's have significant impact on your cashflow

Impact on Operations and Growth 

Business viability and sustainability, loss of confidence, yours and others, poor staff morale, operational inefficiencies and investment limitations. Simply put your Business is, is stifled and stymied and at risk of sinking. 

These are the symptoms and causes of unhealthy cashflow, for remedies check our '8 Tips & Strategies' 

Most Small Businesses will experience ‘cashflow challenges’ those times when the sea of money seems to be adrift, with more money going out of the Business than there is cash coming in! 

If this sounds familiar you are not alone with ‘92% of Australian small Businesses experiencing negative cashflow with owners struggling to pay essential costs such as rent and wages’ (Insight report July 2022). This is financial pressure small Business doesn’t need!

The good news is that there are ways to help stay afloat! With foresight and adopting sound financial management strategies some common mistakes can be avoided and obstacles overcome.

  Here are some common challenges with our Top Tips to help you overcome them!

1. Profit margins: Particularly relevant in the current inflationary spiraling pricing cycle, it’s critical to have true-cost pricing. Don’t let your profit margins be eaten away by increasing costs.

 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!

2. 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 debtors ledger, remember you are running a Business. 

3. 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.

In your way, there they are Roadblocks, barriers and obstructions, holding you back, stopping you from achieving the success you and your Business deserve!

You may be feeling such obstacles are insurmountable and too difficult to deal with.  You are daunted, overwhelmed and even exhausted trying to find answers! 

But don’t give up, there are strategies you can adopt to overcome them. You can achieve the success you deserve!  

 READ on, to learn how you can bypass Roadblocks to achieve your Business Success. 

Let’s get started by looking at some possible Roadblocks  

• Cashflow challenges
• Under utilising resources
• Lack of confidence
• No Marketing Plan
• Poor Customer Service
• Time

Are these familiar to you? 

Yes! Check these 6 Tips 'how to get around them'. 

 1. Cashflow Challenges:

A barrier for many small Businesses, you find you are robbing Peter to pay Paul, and with no Financial Plan or Strategy you are operating on the edge. Stressful and often nail-biting times.

To overcome this barrier 

Simply put, ‘good supplier and customer management will ensure you have a consistent flow of money coming in from sales to be able to pay your bills’. And don’t we all want that? 

There are ‘9 Ways to Help get your Cash Flow flowing’! Click on the link......... https://blackburnaccounting.com.au/blog.

2. Under utilising Resources: 

This can be both human resources and equipment that are available but not fully utilised or employed efficiently to maximum capacity and capability.  Employees lacking training, or without empowerment are wasted resources. Equipment may be in need of upgrade or repair. In this situation, productivity is compromised.

To remove this obstacle 

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! 

Success can be different for everyone, fame, fortune, happiness!  All of those and more!

How you define it will vary as will the factors shaping it. It can look, feel and be different for us all!

If you are a Business owner it also depends on your lifestyle, goals and aspirations and what you hope to achieve with your small Business, now and long term. 

When you consider all these factors and influences, and which are the most important, you might see Success as providing benefits.   

The 6 Benefits of Success  

1. Improve Cashflow
2. Reduce risk
3. Have clear direction
4. Take action
5. Develop a winning Team
6. Having fun

Success looks like, feels like: 

• achieving specific measurable goals and objectives, 
• overall satisfaction, belief in self and Team
• being emotionally and financially stable, peace of mind
• doing what you love and enjoying your work everyday
• reward with profit for hard work
• making a difference, with personal effort, quality products and service.

Let's look more closely at the 6 Benefits of Business Success: 

1. Improve cashflow:

A regular and smooth flow of money in and out of the Business necessary for daily operations, and costs including paying employee's, purchasing stock, and taxes. Positive cashflow indicate the Business liquidity. 

There are 9 Ways to Help get your Cash flowing. Click on link.....https://blackburnaccounting.com.au/blog

2. Reduce Risk: Risk comes in different ways requiring different strategies to manage.

Strategy 1: 

Adopt these 'healthy' practices to get your cash flowing:   

1. 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.  

Whether it’s the price of eggs, utilities or wages, you need to consider how to manage the increased cost of doing Business. 

• Firstly, do you know what your profit margin is for your business?  
• Secondly, do you know your profit margins for the goods and services that you offer?
• Thirdly, which project lines are not profitable and are affecting your business?

Tips:  

• 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’.  

• Be balanced, with inflation affecting your purchases you need to increase your sale prices accordingly.   

• Offer value for money and your customers will keep coming back!  
• Contact Blackburn Accounting to help you to work this out.

Watch for more in this series!