Stopping Your Cashflow Woes

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Stopping Your Cashflow Woes

Cashflow, or the movement of money within your business, is an essential component for your business’ success. Not only that, but your cashflow is a good indication of the current performance of your business. If you have negative cashflow, then you’re spending more than what you’re bringing in. If your cashflow is positive, then you’re making more than what is going out – which is a main goal for your business.

With the new financial year looming, now is the time to look at how you manage yours so you can take any cashflow lows and turn them into something a little more positive.

So, how do you make sure that you understand the ins and outs of cashflow? We’ve broken down exactly what cashflow is and summed up three things that you may not have known about it.

CASHFLOW WOE: BAD BUDGETING & KPIS

Just like in your personal life, creating a positive cashflow depends heavily on you being realistic with your budget and the amount of business that you can bring in. Planning, predicting and setting targets within your business are essential for knowing what you need to do to get the cashflow that you want. If you’re in an industry where there are peaks and troughs (think of the busy Christmas trading in the retail industry) then you should project ahead to account for these trends within your budget.

Make Things More Positive:

Creating an accurate forecast and having goals to strive towards will go a long way to helping with predictable cashflow.  If in doubt, err on the side of caution and overestimate your expenses, while underestimating your income, however, it’s best to get these figures as realistic as possible. If you’re not sure how to budget accurately in your business, it’s a great idea to speak to one of our advisors at Walker Hill who can help you accurately budget for the year ahead and take into considerations things like these industry trends.

 

CASHFLOW WOE: NO CLARITY

It’s hard to get clarity around your cashflow if your business numbers aren’t kept up-to-date. Although bookkeeping isn’t always on the top of many business owners to do list, bookkeeping is a fundamental part of understanding how your business is performing and something that does need to be kept up to date for accurate cashflow visibility.

Make Things More Positive:

It’s easiest to schedule in time to complete this task regularly so you always have clarity around your numbers, and therefore, know exactly how your cashflow is tracking. If you are finding that your bookkeeping tasks are constantly falling behind, outsourcing this task is a great option, as it will allow you to have the clarity you need, while freeing you up to spend more time working on your business. If you’re not sure where to start with outsourcing, talk to us today about our new bookkeeping service offering.

 

CASHFLOW WOE: BAD DEBT & DELAYED PAYMENTS

As the name suggests, bad debt can be a big negative when it comes to your cashflow and is when customers or clients don’t pay you for the service or item provide to them. Delayed payments can also be a large issue and greatly disrupt the predicted movement of your cashflow, especially when you have expenses leaving your account. Although delayed payments will eventually top your funds, it can create a big cashflow headache in the period before payment.

Make Things More Positive:

One way is to make taking part or full upfront payment part of your invoicing process and will help reduce both bad debt and delayed payments, as well as avoid post-completion arguments on costings. In terms of invoicing, if you invoice on completion, ensure that you are sending invoices out in a timely manner, and take note of your payment period. If your payment period is extended (eg. a 90-day payment period), consider reducing it to help deter delayed payments. Finally, if you’ve found yourself with a large amount of bad debt or delayed payments and have some unexpected expenses, consider a business loan as a short-term solution.

 

If your current cashflow position isn’t where you’d want it to be, then looking at how you budget, considering outsourcing options for greater clarity and considering how you could change your invoicing and payment methods will help find ways to create a more positive situation. If you’d like to find out more about cashflow, contact us or try our FREE Cashflow Forecasting tool.