Eight easy cash flow tips for your business
Nina Hendy /
Cash flow woes are common at the start of any year, with SMEs
often struggling to make ends meet . But there is a range of ways to improve
1. Reduce the level of stock
method to improve cash flow is to reduce the amount of working capital required
to fund the trading cycle. Another method includes placing controls over
the stock ordering process and carry stock on consignment if possible, he says.
2. Reassess your accounts payable
process and options
are a number of options available in the open market that allow businesses to
improve cash flow by obtaining longer credit terms while not impacting on the
3. Donít become your customerís
the temptation to have your customers dictate payment terms, advises Michael
Prior of accounting firm PB Advisory Group.
4. Speed up your collections cycle
debtor days Ė the average time taken by customers to pay invoices Ė can have a
dramatic impact on cash flow.
5. Invoice on time
many SMEs struggle with invoicing dramas because they donít invoice until the
end of the week or month. The best way to keep the cash flowing in your business
is to invoice on the spot.
6. Be clear about your payment
business owners arenít doing themselves any favours by not being upfront about
their payment terms.
7. Plan ahead
aside a percentage of your income into a separate savings account as soon as it
hits your bank account. If a client pays you, transfer at around 20% to 30%
into another account towards GST, superannuation, company tax and the like.
8. Understand your cash flow
of potentially viable businesses fail every day due to cash flow issues, understanding
your cash flow will reduce a lot of the stress associated with running a
business, with proper forecasting, youíll be able to see when and where cash
flow issues are likely to strike,Ē she says.