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7 Ways to Improve Your Cashflow

“CASH IS KING” i.e. properly managing cash is an essential pre-requisite for profit. We at Business Result Accountants Pty Ltd are firmly committed to this concept, that in order for SME’s to THRIVE, cash needs to be managed correctly.
We have identified 7 key areas where cash can be (effectively) lost in your Business; the result putting pressure upon Cashflow.

Stock – carrying excessive stock eats up available cash for little or no real benefit. Minimise stock holdings to reduce the need for Cash to pay Suppliers and (possibly) cut down overhead storage costs.

Trading Terms
– Weekly demand for Cash (Wages for example) whilst providing customers with extended terms (e.g. 30 days) will affect your cash flow. Consider re-negotiating trading terms with new and existing customers. Ideally match both the payment and income Terms. If Income is banked before payment to Suppliers is required, the need for cash is reduced.

Debtors – allowing aged debtors to report 30, 60 & 90 day outstanding balances eats up cash. Put in place systems (freeze accounts/reduce trading terms) to regularly encourage early receipt of money. Early collection will make cash available sooner.

Creditors – paying creditors early eats up cash so don’t pay anything you don’t need to ahead of time. Look at extending payment terms with creditors. A balanced approach does seem to work best.
Work-in-Progress – If you have a long lead time on your product or service delivery consider implementing “draws” – a staggered payment schedule triggered by “milestones” in the project. Long lead times between paying for material and labour before invoicing can be detrimental to cash flow.

Product Specification/Quotation -Streamline quoting and specification processes. Minimise the consumption of labour in this stage of the sales and job creation process, without jeopardizing product integrity or profit margins avoids investing too much labour in that percentage of quotes/tenders that do not proceed.

Rework or Production Delays – Delay in invoicing due to production setbacks or rework will slow down receipt of cash and eat up available cash as well as decreasing (perhaps significantly) profit on the job. Review internal communication processes to ensure delays are minimized, and rework is eradicated (where possible).

Simply understanding how cash gets caught up in your business can reveal where cash might be found when needed. Finding Cash when needed will help mitigate against business failure.At Business Result Accountants Pty Ltd we thrive on the opportunity to help business owners improve the cash management of their business, thus improve business profitability.

Call our team today for a review of your cashflow management and see the difference having cash on hand can make to your profits.