Archive for cash flow

The real time for New Year’s resolutions

Alarm ClockThe promise of a new financial year is the best time of year to come up with resolutions, especially for small to medium sized enterprises. Way too many SMEs are in ‘set and forget’ mode when it comes to cash flow management.

It’s never too early to start planning for the end of the financial year.

In fact preparing for the June 30 is a year-round job. It’s been my experience that the special needs of the end of June 30 often catch SMEs by surprise, even though the same things must be done on an annual basis.

Cash flow can become one of the biggest problems for small and medium businesses at the end of each financial year.


There can be a down-time in trade for stocktake, slashing of profits margins due to seasonal sales, the settling of debts, chasing of creditors, and a binge of last minute budget-balancing spending. Without planning, tax time obligations can deplete current cash flow reserves and this can have a negative impact on the following year’s operations.


SMEs have the advantage over big business in that they can more readily adapt to the changing environment in which they operate. But on the flip side if you fail to do this you will pay heavily. It is not unusual to find SMEs rigidly sticking to certain ways of doing things, even when small warning signs start to trigger major alarms.

Far too many of my clients tell me that they are too busy running the business to worry about things such as cash flow.

Managing cash flow is critical to the success of any business – small or large – and a bit of advance planning might be all that is needed to free up liquid assets and ensure ongoing profitability.’s 10 Resolutions EOFY for SMEs:

Embrace change

What works one year might not work the next: unsettled markets, fickle clients, different suppliers and staff, changes in operational procedures, refurbishments, capital asset shifts, different taxes, and complying with updated legislation can all have a big impact on cash flow.
As well a changing lifestyle – mortgage, children, travel, retirement plans – can see those cash assets repurposed or diminished.
Resolve to not only embrace change each and every financial year, but to adjust accounting and management practices to accommodate this change. Sticking with the same old way of doing things could limit growth, productivity and profit.

Leverage low interest rates

Cash reserves are not getting the return they were even just a few years ago but low interest rates can be made to work in an SME’s favour.
Consider if it is worth investing in capital equipment and paying off debts while keeping lines of credit open.
Resolve to leverage low interest rates but budget now for higher rates over the next few years.

Cash upfront and in advance

It might seem counterintuitive to pay for some services and utilities including insurance and phone plans upfront when such outgoings can be managed on a monthly basis.
It is possible though to save up to 10 per cent by shopping around and being willing to make a one-off, advance payment. This is especially true when it is known that certain premiums, such as health insurance, rise annually. Paying for the following year in advance before the price rise can see a saving of 3-6 per cent.
Such savings can be much higher than current interest returns on cash deposits.
Resolve to shop around or negotiate savings on fixed costs.

Direct debit not direct debt

Another tactic to improve cash flow is to set up direct debit accounts when discounts for this payment method are offered.
Direct debit can lead to savings of around 4 per cent on fixed costs, but this will be more than wiped out if there are insufficient funds and the supplier and bank impose heavy penalties.
This style of auto debt can also damage a good credit rating.
Resolve to manually check that there is no danger of the autopilot failing.

Dance with the dollar

Even if a business is not an importer or exporter, chances are somewhere along the supply chain it could be slugged with higher costs as the Aussie dollar slumps or reap the rewards when it rebounds.
A rising or falling Australian dollar has an impact on consumer confidence and influences if buyers will go offshore for a better deal, even if it is to buy everyday items online from an offshore outlet.
Resolve to keep an eye on the Aussie dollar.

Time the annual return

If the tax office owes the business money, try and get it back as soon as possible after June 30. The refund might also beat the rush and take less time to process.
Small companies lodging their own returns have until late February 2016 or October this year if there is a history of late reporting.
An accountant will advise on the due date as will the ATO.
Resolve to get that cash back as quickly as possible or avoid paying it out for as long as possible.

Choose the best GST option

Compulsory collection of the goods and services tax can artificially inflate cash assets by 10 per cent. Refunding that 10 per cent to the ATO as a one-off payment can blow a big hole in any business budget.
To help maximise cash flow, choose a GST payment option carefully.
A small business with an annual turnover of less than $2 million or with a GST turnover of less than $2 million can pay GST by monthly instalments or quarterly.
Resolve to choose the best option for GST payments.

1 July changes

July 1 is the usual date for a raft of tax changes to take effect.
In 2015 there will a reduction in the company tax rate from 30 per cent to 28.5 per cent. This could be offset by an additional levy for businesses with a taxable income of more than $5 million.
Other changes to personal tax such as a freeze on income thresholds for private health insurance and the Medicare levy as well as changes to family benefits taxes could indirectly impact business cash flow as household expenditure changes.
Resolve to know how 1 July changes will affect the business.

Off peak rates

Prices drop and there is more choice when holidaying out of peak season. The same can be said for financial and legal advice.
Even if accounting and legal fees stay the same year round, seeking advice in off peak times can mean an adviser might be better focussed or more appointments are readily available.
It also means end of year planning can start as soon as possible.
Resolve not to leave finding out what is needs to be done until the same time as everyone else.

Depreciation, deductions and donations

To make the most of a favourable depreciation deal, buy in July.
Grab all cheaper directly deductible bargains right up until midnight on June 30. A deduction is a deduction based on its purchase date, not whether or not it was used.
Be aware too that charitable donations and gifts can offset tax liability. To claim a tax deduction, first check that the organisation has DGR (deductible gift recipients’ ) status.

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 .