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22-03-2016Eight easy cash flow tips for your business

Eight easy cash flow tips for your business

Nina Hendy / SmartCompany says:


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 your situation.


1. Reduce the level of stock

Another 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

There 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 supplier.

3. Donít become your customerís banker

Resist the temptation to have your customers dictate payment terms, advises Michael Prior of accounting firm PB Advisory Group.

4. Speed up your collections cycle

Improving 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

So 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 terms

Small business owners arenít doing themselves any favours by not being upfront about their payment terms.

7. Plan ahead

Put 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

Scores 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.



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