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Cash Flow Management – The Key to Financial Success of Your Business!

By March 1, 2024No Comments

Let’s start with the purpose:

  • Proper cash flow management is crucial to maintain liquidity and growth
  • All business decisions must be made in consideration of cash flow impact

Cash is King

Running a small business may be a rewarding experience, but more and more business owners face mounting cash flow challenges. With cost pressures on both the businesses and the consumers, growing costs of borrowing and tougher lending conditions, businesses must remember that cash is king: business keeps afloat as long as it has access to cash. In banking terms, it’s called maintaining liquidity.

Whether the cash comes from investors or is generated through business, proper planning and management is essential to stay on top of your dues.

Prepare a Budget and Cash Flow Projection

With the dynamic nature of business, it’s important to develop projections and budgets for the future. Consider the timing of your budget, your fixed and variable costs and forecasted income. Keep track of your income and expenses and compare your predictions to actual results. By understanding the ebbs and flows of your business, you can make relevant adjustments and prepare for any shortfalls to ensure long term success. Make sure your tax obligations are included in your plan: ATO is now authorised to report your tax debt to credit agencies, and this may have a ripple effect on dealings with suppliers.

Consider your cash flows when preparing your work and scheduling plans, don’t leave almost-finished work sitting around for too long, issue interim invoices whenever you can.

BTMH can help you in forming these vital assumptions to build comprehensive cash flow projections and to help with performance analysis and strategies to grow your business.

Negotiate with your Vendors

Negotiation is a vital tool for small business owners. Developing good relationships with your vendors can significantly help in cash flow matters. When discussing payments, negotiate payment dates that fit your cash flow. For example, if you purchase supplies which will take a few weeks to convert into a saleable product, negotiate payment after you turn the product into cash.  can significantly reduce your business stress.

Keep a tight grip on expenses. Commonly done via anexcel spreadsheet or accounting software, consistent and diligent record keeping will ensure that all your expenses are recorded. This data can be used not only to claim tax deductions but can also lead to an effective review of your spending; forming a plan to reduce it, or use your cash in a more efficient way.

If you’re in debt, stay on top of any debts by prompt communication, setting up payment plans and keeping your creditors in the loop. Lack of communication prompts creditors to take legal action early. At worst, consider legal paths to protect the value of the business, and its future potential, such as external administration.

BTMH can help with your debts and finding paths to positive cash flow, and way out of debts.

Stay on Top of your Invoices

A regular stream of income is important in every business. Reminding clients of their overdue invoices can be intimidating and easy to push to the side, but it’s important to take a proactive approach to ensure that the money continues to flow. Be clear about your payment agreements with your clients. Send your invoices to your clients as soon as you can and look at automating your invoicing system. By automating aspects of your system such as reminder emails, you not only save valuable time and money, but also eliminate the possibility of simply forgetting to do so. React quickly to overdue invoices and make sure you know your debtors’ situations. Good payers can turn into bad debts quickly.

It pays to offer a variety of payment options, such as PayID and credit cards. It may sound expensive, but if customer doesn’t have cash, or is otherwise in trouble, copping the fees may be the less expensive option.

BTMH offers bookkeeping and debtor management services, helping you taking a firm stand on unpaid invoices.

Help is Available

While cash flow management can be tricky, there are plenty of resources and guides available to help your business thrive. You can always follow BTMH on our social media to keep up-to-date with the last tax news and deadlines. Moreover, our friendly accounting team has extensive experience in assisting small businesses with their cash management. Whether you are just starting a business or have been in the game for a good many years, our team can provide you with essential insight into cash flow management and optimal taxation practices. We can develop cash flow projections, help with tax management, business structure, compliance and grants. We can also help with developing strategies, business plans and raising capital, as well as in bookkeeping and office management matters. You can us in our office in Bondi Junction or connect online – Book your appointment today.

Thomas Murmylo

Thomas is the Principal Tax Agent at BTMH. Unlike most in the accounting industry, Thomas takes a different approach when it comes to the management of his clients’ taxation and accounting needs. Thomas has helped local and international businesses to grow and prosper for more than 30 years.