How to Avoid Cashflow Lumps as a Business Owner
Written on the 11 October 2018 by Nathan Drew, Fox Finance Group
Cashflow Tips - How to Avoid Cashflow Lumps as a Business Owner
You may have heard the saying that Cashflow is King?
A lot of business owners struggle with understanding exactly what effect is of not having a strategic plan around cashflow funding and how this could affect their business at some point.
At the end of the day, cash flow is about having money in your account at the end of the week. It's crucial for when it comes to pay expenses, repaying debt and planning for business growth. Here are some common cash flow mistakes to avoid, and how to stay on the right path to success.
1. Putting Your Head in the Sand
Some common issues arise after a business suffering from poor cashflow for example, tax debt, bills piling up or missing your loan repayments. Obviously staying on top of these things is key, but not having a plan in place for when things do go not quite to plan is just as important. Keeping the communication lines open with suppliers and the tax office is something that a lot of people fail to do. They stick their head in the sand as they keep forging ahead with the everyday rigors of everyday business life. Most suppliers will be more than happy to work with you on a payment plan so keep the conversation open and flowing.
2. No Business Plan or Cashflow Projection
Running a business without a solid business plan and cash flow projection is like playing darts in the dark. If this isn't something that you have had experience with previously, engage with a professional service to help you. Taking the time to put an achievable business plan in place is crucial to your success. It will help you prepare for seasonal business cycles and any one-off costs that will arise.
3. Letting Your Outstanding Invoices Mount Up
Not having a strategy on following up on your outstanding invoices can stop your cash flow in its tracks. Businesses that utilise their accounting software program to effectively politely follow up their invoices have a much lower rate of concern around cashflow in the business. Automated online overdue reminders are key to saving you both time and money, plus it will help you get your money back into your account where it belongs.
4. Stick to the Plan
Once you have your business plan in place, avoid the temptation to make snap decisions around spending. One of the things that most business owners love about running their own business is that they have the final say. That's great, but it's still important to think through the pros and cons of every purchase and if your business will truly benefit for that purchase today.
5. Too Much Inventory
It's a fine line between having the right amount and mix of inventory and holding too much of the wrong slow-moving inventory. Performing a rolling stocktake in your business is key to keeping on top of your inventory stocks. If your stocktake reveals that you have old stock taking up space, maybe coming up with a marketing plan to discount on bulk orders to get the old stock off your shelves to make way for newer, higher turnover stock is in order.
6. Inadequate Accounting Software
Online accounting software has come a long way over the past 5 years. If you are looking for different ways to simplify your administration process so you can focus more time into growing your business, then you need to be on top of this part of your business. If you haven't already taken the plunge into the accounting cloud, it may be time to move into an automated system that lets you easily send invoices, make payments and run reports on your financial health.
Simple to use, low cost cloud accounting systems are now widely used and can help you manage your business finances. Start by making a list of what you need, and then look for the system that works for you. Paying a monthly subscription fee can be worth it if it saves you time and helps you get invoices paid.
Do you have someone in your corner?
At Fox Finance Group, we have a team of industry professional available to help you with everything from business planning, cashflow funding and also asset and equipment funding.
If you would like to learn more about managing this in your business, please contact us on 1300 665 906.
Learn more about the Author Nathan Drew.
Author: Nathan Drew, Fox Finance Group
About: CEO - Fox Finance Group