As a tax agent we regularly come accross cleints who run a profitable business but dont have good cash flow. Cash flow can have a huge impact on the business growth. It is the amount of money that’s being transferred in and out of a business that largely impacts its liquidity. Cash flow is also the root of a business’ success that can be more important than employees, revenues, mission statements or websites.
Without cash, there is no business. Therefore, in order to increase cash flow in YOUR business, we have come up with the following tips:
- Invest in your business: Any steps that you take to build on your business will prove to be helpful in the long run. These can include training staff, widening the marketing plan or investing in products that increase the business appeal.
- Speed up receipt of cash: Logically speaking, shortening receivables is bound to increase cash flow. So, send out invoices immediately after goods have been delivered, or change your current payment terms from, say, 6 months to 3 months or 60 days to 30 days, depending on the type of business you own. Request progress payment on large orders.
- Long term financing: Taking a loan to purchase extra equipment that assist with profits such as furniture, vehicle or technology instead of using person cash or business savings isn’t always a bad idea. In doing this, you’ll possibly have enough savings that can be used later on for the business when cash flow is tight.
- Encourage the use of cards: Again, this is something that depends on the nature of your business. Accepting credit and debit card payments allow you to receive next-day value for sales and services easily without having to deal with cheques and annually making deposits.
- Analyse your cash flow: It’s normal and common for businesses to go through periodic highs and lows. Cash flow analysis can be used to highlight the ‘highs’ as well as the ‘lows’ that can be used in many ways to improve your business. They can be a great indicator of the effectiveness of staffing, marketing efforts and borrowings among other things.
- Work with an accountant: Accountants are largely undermined these days with the introduction of software programs that claim to be just as effective as bookkeepers. However, an accountant can review cash flows of a business and provide insights into areas that programs don’t have ability to look into and considerations that you may have overlooked. Their role is to assist you in anticipating and plan for any ‘lows’ that the cash flow in your business may suffer in the future.
- Having a cash flow plan: This will be really helpful so you know exactly where you are and what needs to be done to get to where you want to be.
So there you have it! Try out these tips and see your cash flow go up! Contact one of our expert Cranbourne tax agents and Cranbourne tax accountants to help you with improving your cash flow and cash flow planning.