Cash flow is very often the number one stress for many of our business clients. There are few tips that we have to assist the properly managing the cashflow within your business. We are firmly committed to this concept, in order for SME’s to THRIVE, you need to look at areas of bottlenecks within you business.
We have identified 8 key areas where cash can be (effectively) lost in your Business; the result putting pressure upon Cashflow.
Analyse your stock on hand – carrying excessive stock eats up available cash for little or no real benefit. Minimise stock holdings to reduce the need for Cash to pay Suppliers and(possibly) cut down overhead storage costs.
Renegotiate Trading Terms – Weekly demand for Cash (Wages for example) whilst providing customers with extended terms (e.g. 30 days) will affect your cash flow. Consider re-negotiating trading terms with new and existing customers. Ideally match both the payment and income Terms. If Income is banked before payment to Suppliers is required, the need for cash is reduced.
Analyse your suppliers costs – it’s always a great idea to look at the cost of all of yoursuppliers, are you getting the best price in the market for supply of good. An annual analysis of suppliers could lead to thousands of dollars left in your bank account.
Educate and inform your debtors – allowing aged debtors to report 30, 60 & 90 dayoutstanding balances eats up cash. Put in place systems (freeze accounts/reduce tradingterms) to regularly encourage early receipt of money. Early collection will make cash available sooner.
Balance the payment to Creditors – paying creditors early eats up cash so don’t pay anything you don’t need to ahead of time. Look at extending payment terms with creditors. A balanced approach does seem to work best.
Work flow payments – If you have a long lead time on your product or service deliveryconsider implementing “draws” – a staggered payment schedule triggered by “milestones” in the project. Long lead times between paying for material and labour before invoicing can be detrimental to cash flow.
Product Specification/Quotation - Streamline your quoting process. Minimise the consumption of labour in this stage of the sales and job creation process, without jeopardizing product integrity or profit margins avoids investing too much labour in that percentage of quotes/tenders that do not proceed.
Rework or Production Delays – Delay in invoicing due to production setbacks or rework will slow down receipt of cash and eat up available cash as well as decreasing (perhapssignificantly) profit on the job. Review internal communication processes to ensure delays are minimized, and rework is eradicated.
It may seem like a daunting task to identify all the areas where cash is being caught up in your business. However, if you systematically tackle one step at a time throughout the year, it will make a big difference to your bottom line. It won’t take before your stress levels go down either.
If you need some assistance in this area, then please call the office today and we can help you through the process.
"When I was working in Australia I had no idea what I was doing when it came to my taxes or finance, Brock and his team helped me so much, after a while i understood what I needed to do and they even did it for me, they explained everything in a no nonsense manner." David Dixon-Angélil
Phone: 1300 427 526
Address: 15 Melway Crescent
HARRISTOWN QLD 4350,
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In 2016-17 financial year, 30,161 people used the Bankruptcy Act 1996 to seek relief from debts. 16,518 of these resulted in bankruptcies. 30% of these cases were in Queensland, and 19% of these cases were the result of carrying on a business.