Your cash flow is the driving force behind your business. Every business has peak times and quiet periods, so understanding your cash flow means you can plan to cover your costs, make money and support the growth of your business.
Here are some tips to help you manage your cash flow and keep your business healthy.
Forecast how much cash your business needs day to day
- factor in seasonal impacts, so you can operate and pay your bills during less busy times
- know how much cash you have at all times. Study your cash flow forecast to find where the weaknesses and opportunities are in your incomings and outgoings to help bolster your cash flow.
- pay your invoices on time and make sure your loans suit your needs. If you’re having trouble making payments, get help straight away.
Make the most of your cash
- build up enough funds to have an emergency fund. You might need to cover price increases from your suppliers, payment delays or other unexpected costs.
- make use of interest free days on your business credit cards or take out a Business Overdraft
- if your business has enough cash to spare, consider opening a high interest savings account
- if you need equipment, find out if it’s more cost-effective to purchase using a loan. You can spread the business loan repayment costs out over the life span of the equipment and keep your cash for the day-to-day expenses.
Keep your cash coming in
- make it easy for customers to pay you quickly – invoice them straight away, give them your account details or help them pay you by EFTPOS, BPAY® or online
- be clear about how and when payments should be made – to avoid any awkward conversations later
- figure out how flexible you’re willing to be – sometimes there’s a very good reason your customer hasn’t paid and you might need to offer them a bit more time to pay your invoice. Let them know how much extra time you’re willing to give, be polite but clear on what your next steps would need to be if they don’t pay on time.
- be on good terms with whoever pays your invoices – it might not be the person you do business with, especially if it’s a large company or organisation. Introduce yourself and regularly keep in touch. It’s easier to chase up any payments owed with someone you’ve established a relationship with.
- when chasing up payments, always be polite – getting angry or upset is not likely to get you paid any faster and could damage your reputation. If you’re really having trouble, you could consider a polite letter of demand or speaking to a debt collection agency.
Source – (www.bankwest.com.au/)