Getting your cash flow sorted for Christmas
It’s that time of year when cash flow can become a particularly challenging issue for many business owners. At our November Business Networking Lunch held at the ECU Learning Hub at Maker+Co, our guest speaker Juanita Goodlich from JG Accounting & Business Services gave us her top tips for getting your cash flow sorted for Christmas.
Juanita says it is helpful to think of cash flow like a sink. Income (IN flow) is the tap that helps to fill our sink. When business is good the tap runs fast filling the sink quickly but when business is slow the tap just trickles or drips and in some periods the tap may be turned. Expenses (OUT flow) on the other hand are the plug hole. Money can flow out as quickly or sometimes even faster that it flows in so unless you have planned and budgeted for these occasions your sink may run dry! It is good practice to occasionally put the plug in for times when the tap runs dry or even fill a jug to store for a later date.
Juanita’s top ideas for managing your cash flow:
- Forecast you cash flow over the year and bank money in our busy months to get you through your slow ones.
- Invoice now! Don’t wait to the end of the month.
- Look for signs of bad payers and trust your instincts.
- Don’t be frightened to negotiate payment terms with your suppliers.
- Always review your expenses for a better deal to make savings.
- Plan for your commitments (GST, Super etc) balancing these with your investments.
- Pay yourself regular payments.
- Structure your product offering to spread business across the year.
- Set up recurring expenses as direct debits.
- Chase your debts!
Strategies for chasing debts include:
- Keep your communication with clients open.
- Stick to your payment terms.
- Send reminders with increasing urgency for payment – friendly reminder – highlight overdue payment – threaten action.
It’s a fact – 82% of businesses fail due to poor cash flow. Effective planning, budgeting and forecasting can make or break your business. If you leave the tap running without capturing some water in the good times your business can become part of that 82%.
It’s important that you strategise to take steps to plan for and take greater control over your finances and cash flow. Implement at least some of these steps to help your cash flow.
Plan ahead and get the right help. Seek help from a good Accountant, Bookkeeper or Financial Advisor and others (e.g. debt collector).