Archive for Cash Flow

New Year, new cash flow

Walking or running legs in forest, adventure and exercisingMost small businesses relish the year ahead thinking about how to change things for the better. But back in the office instead of on the beach, or checking the accounts payable rather than the cricket scores, new year resolutions might seem like impossible delusions.

 

This doesn’t have to be the case.

Here are my tips to ensure that you keep striding out towards your goals and 2015 doesn’t become the year of the cash flow woes.

 

1. Smooth out the season

If you’re currently riding high in bonanza territory, don’t see it as a one-off.

Stash some cash for those moments when your business is more lonesome cowboy than John Wayne.

If you’re in a financial hole, pole vault out of it and leap to put in place a January resolution to boost cash assets to get a jump on the year.

2. Push for upfront payments

Map when your clients might take a little longer than usual to pay.

Overdue invoice? Late delivery?

——————————————————————————-

A quick phone call can often resolve things more quickly and effectively. Leave the streaming to Netflix, not endless emails.

——————————————————————————-

Asking for accounts to be fully or partly settled in advance can also help identify problem payers as well as uncover the Accounts Champions of 2015.

 3. Think “Christmas” all year round

Growing your customer base is a sure-fire way of improving immediate profits and long-term viability.

Some proprietors see their business an extension of their personality. This means they might be providing a service or product that meets only their needs.

——————————————————————————-

It’s not really possible to understand what you can give until you can see your business from your customers’ point of view.

——————————————————————————-

Think of three typical clients: who are they, where do they live and work?

What interests and motivates them? And that card to go with the gift, how might you personalise the message to each of them?

4. The only stuff that’s secret is what you haven’t yet found out

Want to know even more about your customers? Ask them.

Want to know even more about your competitors? It may seem ridiculously simple, but Google them. There’s often no need to guess what the competition is up to. It’s usually online for all to see.

And if you’re feeling truly inquisitive, find some squirrelly way of soliciting how your customers feel about your competitors.

5. Are all systems GO!?

It can be tempting to begin the new year assuming everything is in place and set to go … after all, it all worked ok last year, didn’t it?

  • With more knowledge about your clients and competitors, do a systems check: What new skills do you need?
  • Is there a need for a faster, more secure website with live chat or better in-store or over-the-phone customer service?
  • Would your product descriptions make sense to someone who has never heard of you?
  • Is there a staff member who has an interest in a more financially-viable role?
  • Are you still relying on faxes when new software can do the job?
  • When did you last update your accountancy software?
  • Sometimes smaller short-term investments can lead bigger long-term gains.

6. Sweat the small stuff

A small increase in the profit margin of each and every sale – combined with more customers and stronger positioning against competitors – can significantly boost cash flow.

Small efficiencies can also do much for the bottom line. While it might not be thought fashionable to sweat the small stuff, it’s the little things that keep customers coming back for more and an eye for detail the keeps cash flow in control.

7. Cut costs

You don’t have to go the full Scrooge to cut costs. After all, shrinking a business isn’t the best way to guarantee an effective cash flow.

Only give the gifts that count; look at the expenses that generate the results. If there’s spending that’s not going anywhere, stop it before you too wind up at a dead end.

——————————————————————————-

Resolve: If it’s not generating income, don’t spend it.

——————————————————————————-

8. Sort your suppliers

Have a clean out and review old agreements.

Use the new year to renegotiate better terms and conditions, cheaper fees or added value from suppliers.

9. Embrace chaos

Monitor the market and see what others are offering.

Shop around and take advantage of any volatility that could see a good return or an opportunity to dispose of seemingly unsaleable stock.

10. Credit only where credit is due

Some SMEs survive on a boom and bust cycle. When customers want to spend up big, check their credit before celebrating.

If in doubt note the warning signs, tighten your terms and conditions or initiate a strict cash-on-delivery or EFT – electronic funds transfer – policy.

Putting the squeeze on doesn’t need to be a permanent preoccupation. July 1 provides the perfect opportunity for review.

11. Let the banks pay

Accepting credit card payments means the issuing financial institution, rather than your business, carries the risk.

So this year why not take advantage of the bank’s generosity and let them give the gift of an interest-free period?

12. Tax and Super don’t go on holidays

It can be easy to overlook setting aside extra cash for to cover regular outgoings during the year’s financial fluctuations.

Payroll tax and superannuation levies don’t go on holidays even though staff do. Take note of due dates, set aside adequate funds in a holding account, and don’t be tempted to use this money to compensate for a drop in cash flow.

Be aware that increased sales attract extra GST, so plan ahead.

13. Spend other people’s money, wisely

Building business based on borrowing is a well-practiced principle.

Ensure that any sudden solution adopted to stump-up a slump doesn’t become a long-term liability.

Carefully consider the borrowing terms. Unless needing backing for major, long-term capital investment, short-term options such as an overdraft or credit card payment might be enough to tide your business over.

If family or friends are part of your cash flow rescue plan, ensure their agreement well before a loan is needed. Professionalism remains essential. Prepare a written agreement that details all terms and conditions and have it signed by all parties, well before breaking out the bubbles to celebrate.

14. Don’t let it rain on your parade

Having a respectable, additional cash reserve in a separate, high interest bearing account could mean that every financial cloud literally has a silver lining.

15. Keep it real

Financial reports need to clearly and accurately detail the basics: what funds are available today, what is tied up, and what is owed.

Our clients use tools like CashMAX Forecaster to help them manage and monitor their business activity in real time.

If you haven’t already done so, make a New Year’s resolution to keep financial reporting real, and monitor your cash flow daily for many happy returns throughout 2015.

 

++ This article was published in Ninemsn Finance and Inside Small Business .

 

The 12 Days of Christmas

12DaysChristmas… How to avoid seasonal cash slump and make the most of your Christmas trading. This article  I put together for Kochie’s Business Builders should help you through.

Most of us enjoy the traditions of Christmas parties and days on the beach, but for small businesses there can also be the less happy tradition of cash flow woes.

An advantage of running a SME is that adjustments can be made quickly to take advantage of opportunities or to detour to avoid disaster.

Rather than ending up stranded like a partridge in a pear tree come the New Year, this Christmas why not focus on one sound business principle a day, for twelve days, to help avoid a financial dilemma?

Day 1 – Push for upfront payments

Collecting payments upfront rather than spending time chasing debt in the New Year will bring good cheer to any business.

Remember a quick phone call can often resolve confusion over an overdue invoice or a late delivery far better than a string of emails bouncing backwards and forwards.

In the longer term, asking for accounts to be fully or partly settled in advance, can help identify problem payers as well as uncover the champions in accounts payable department.

Day 2 – Look from the outside in

Growing your customer base is a sure-fire way of improving immediate profits and long-term sustainability.

Increasing your customer base means understanding not only your clients, but your competitors, from an outsider’s perspective.

Think of three typical clients: who are they, where do they live and work? What interests and motivates them? If you sent Christmas cards, how would you personalise the message on each?

Also, beware the Grinch. Find three potential competitors. What are they doing to attract your three profiled clients and steal Christmas away from you?

Day 3 – Now look at the inside, from the inside

With a clearer picture of the way your business is seen by customers and competitors, it’s time to start dishing out the presents around your workplace.

With your client and competitor profiles in mind do a checklist: Is there a need for a faster, more secure website with live chat or better in-store or over-the-phone customer service?

Would your product descriptions make sense to someone with no background knowledge?

Is there a staff member who has an interest in a more financially-viable role? When were your accountancy systems last updated?

Day 4 – Sweat the small stuff

A small increase in the profit margin of each and every sale – combined with more customers and stronger positioning against competitors – can significantly boost cash flow.

Small efficiencies can also do much for the bottom line. While it might not be thought fashionable to sweat the small stuff, it’s the little things remembered from Christmases past that keep customers coming back.

Day 5 – Cut costs

You don’t have to go the full Scrooge to cut costs. After all, shrinking a business isn’t the best way to guarantee an effective cash flow.Look at the expenses that generate results.

If there’s spending that’s not going anywhere, that’s the sort of free gift you don’t want to be giving away this festive season. Make a resolution; if the money is not generating income, don’t spend it.

Day 6 – Sort out your suppliers

Have a clean out and review old supplier agreements.Use the New Year to renegotiate better terms and conditions, cheaper fees or added value from suppliers who might have gotten as stales as last year’s mince pies.

What are others are offering? Shop around and take advantage of any seasonal volatility that could see a good return or an opportunity to dispose of seemingly unsaleable stock.

Day 7 – Credit only where credit is due

Christmas can be a time when new customers want to spend up big. Don’t swing into holiday mode too early by failing to run a credit check.

If in doubt, note the warning signs, tighten your terms and conditions or initiate a strict cash-on-delivery or EFT policy, which of course can be reviewed in the New Year.

Day 8 – Let the banks pay

Accepting credit card payments means the issuing financial institution, rather than your business, carries the risk.So this Christmas why not let the banks give the gift of an interest-free period?

Day 9 – Tax and super don’t holiday

It can be easy to overlook the payment of taxes such as GST as well as superannuation in the midst of so many public and staff holidays.Take note of due dates, set aside adequate funds in a holding account, and don’t be tempted to use this money to compensate for a drop in cash flow.Be aware that increased sales attract extra GST so plan ahead.

Day 10 – Spend other people’s money, wisely

Building business based on borrowing is a well-practiced principle. Ensure that any sudden solution you adopt over the festive season doesn’t become a long-term liability.

Consider carefully the borrowing terms. Unless needing backing for major, long-term capital investment, short-term options such as an overdraft or credit card payment might be enough to tide your business over.

Day 11 – Keep some cash in reserve

Having a respectable stash of cash squirrelled away in a separate, high interest bearing account could be the difference between SME Santa going Ho! Ho! Ho! rather than Oh No! No! No!

Day 12 – Keep it real

Financial reports need to clearly and accurately detail the basics: what funds are available today, what is tied up, and what is owed.

On the twelfth day of Christmas, make a new year’s resolution to keep financial reporting real, and monitor your cash flow daily for many happy returns throughout 2015.

New tool takes the pain out of planning and managing cash flow

Kochie’s Business Builders has hit the streets with the CashMAX Forecaster story. CashMAX  aims to stop business owners burying their heads in the sand when it comes to cash flow.

The tool covers forecasts for specific areas like loans, sales, labour, expenses and stock and compares them to actual results.

David, the tool’s creator, accountant and CEO ROCG Asia Pacific says “spreadsheets tend to break easily and don’t cut it anymore. We found a lot of small businesses give the paperwork to their accountant and sit there, then get a plan back, without being aware of what’s going on. This tool breaks it down into dynamics that work for that business.”  To read the full story visit Kochie’s Business Builders.

 

CashMX

CashMAX_ForecastSales_screen