Dynamic Business

Always be alert

Instigating good cashflow management processes is the first step to driving a successful business, but it doesn’t stop there. The cashflow cycle needs constant attention through good times and bad. As many owners will attest, running a small business can be a bumpy journey, but being in control of your finances can help to smooth the path to success.

-Symon Brewis-Weston is executive general manager, Local Business Banking, Commonwealth Bank (www.commbank.com.au).

How to speed up your cashflow

1. Know the balance sheet inside out

Create a cashflow tracker, keep it up-to-date and consult it daily to keep on top of when income from sales will be received and what outgoings are scheduled.

2. Make the billing cycle work

All businesses are different, but subtle changes can have a significant impact. For example, billing a quarter of customers every week can bring a steady flow of funds into the business, rather than one mass billing at the end of the month. Similarly, implement electronic banking facilities or request to be paid by credit card so that customers get the funds into your account directly and quickly.

3. Unlock cash

Try not to have too much capital tied up in stock and equipment. Aim to turn over excess stock, even at a slight discount. Also, consider using leasing solutions for equipment instead of buying it outright.

4. Have a contingency

Cashflows can fluctuate throughout the year so it’s important to prepare for any financial shortfalls during slow business periods.

5. Make cashflow a team responsibility

People can be the cause of both peaks and troughs in the cashflow cycle. By educating staff on how the cashflow cycle works they will be better equipped to help you manage it.

6. Stagger outgoings

Aim to avoid multiple bills in one month. This can be achieved by using a combination of business credit cards, leased items, and periodic payments.

7. Every cent counts

Reassessing the pricing strategy doesn’t have to mean inflated price hikes, but it is important to ensure that pricing covers all costs, reflects the market and is competitive. Often, just a few cents increase can help release some of the pressure and help drive profits.