5 Tips for Maintaining Positive Cash Flow

by | Oct 19, 2016

Understanding the difference between profit and cash flow is critical. Many business owners make the mistake of focusing almost exclusively on profit. While it’s certainly important for businesses to earn a profit over time, the timing of expenses, in relation to revenues, is the key to being able to continue operations.

Unless cash flows are adequate to cover the payment of operating expenses, the business will be in danger of immediate failure. The following tips can help you to maintain a positive cash flow.

Encourage Early Payment of Receivables

Accounts receivables are monies that are owed to you.  You can temporarily increase your cash flow by encouraging your clients to pay you early.

Automatically send invoices to clients once work is completed or delivered.  Offer a small discount, of 3 to 5% of the balance, to customers who pay early, usually within a few days of receiving the invoice.

For clients who have a past due balance, consider sending a polite reminder of the bill that is due, and advise if they will pay within the next week, any late fee or interest charges will be waived. This will encourage your late paying clients to go ahead and pay what is owed.

If you are experiencing a timing issue with your cash flow, and need to receive more revenue quickly, you may want to consider assigning your right to payment for your accounts receivables to a third party.  Often you can receive payment for current or past due receivables upfront and directly from a third party. Be prepared to waive 10 to 20% or more of the balance that is owed to you as part of their fee.

Know Your Expenses and Actual Costs

One reason that so many business owners have such difficulty maintaining a positive cash flow is that they don’t really understand their actual costs, and when payment for bills and other expenses are likely to come due.  When you understand your actual costs, you are then able to calculate your breakeven point for the goods and services that you sell.

In this way, you can make certain that you are charging enough to generate an income stream that will exceed your costs. You should also aim to time your receipt of revenues to happen before payment for your expenses is due; so that you don’t end up short on the day your bills must be paid.

Just as you want to encourage your clients to pay you as quickly as possible, you should delay payments that you owe others as long as possible. Remember to pay before you are charged interest, late fees or damage to your credit standing with your vendors and suppliers occurs.

Creative Incentives vs Discount Sales

Many times businesses will offer special discounts off of their regular prices in a bid to stimulate sales. While this strategy may bring in some additional revenue in a short period, it tends to be counter-productive in the long run if the new, discounted price ends up being lower than your actual cost to produce the item. A much better strategy is to offer special incentives to your clients that generate additional revenue. Offer perks and reward to clients that refer new customers to you, and that return to you multiple times for repeat sales.

By creating and offering incentives that encourage loyalty and repeat business, small businesses can stimulate sales without running the risk of eroding the strength of their base prices and overall pricing strategy.

Offer Pre-sales

What’s better than getting paid when you deliver a product or service? Getting paid upfront before you deliver the item! Once you are certain of the date that you can deliver the item, offer pre-sales to stimulate revenue before you’ve produced the product or service.  Just be certain that you will be able to deliver the item on time before you commit to a delivery date and offer the item for sale!

Build a Cushion

Don’t spend all of your sales. Maintain a cash reserve on hand of around 20% of revenues to insulate and protect your business so that you can continue to cover costs and expenses during seasonal, slower sales periods or in case you experience a sudden, unexpected downturn in revenues or other catastrophic event.

Being able to maintain a positive cash flow truly comes down to preparation and being able to keep up with the status of your accounts. Using an automated and fully integrated accounting software program, such as Xero, makes it easier to update your accounts, including your accounts receivables and accounts payable.

With Xero, you can quickly create reports that provide current information on inventory, and cost of goods sold. The software allows you to see your current financial performance, and forecast your cash flows, with just a couple of clicks. Determining your actual cost and breakeven points is effortless as well, which makes strategic planning and developing your marketing and pricing strategies fast and painless as well.

With easy to use software that securely stores your data in the cloud; you can access your financial information from anywhere, at home, in the office or on the go so that you can track changes in real time and know exactly where you and your business stand at any moment.

Instant, up-to-date tracking of all of your accounts allows you to take quick action to structure the flows of income that both enter and leave the business so that you can rest easy with the knowledge that you have enough cash flow and cash reserves on hand to support sustainable growth and continued operations!

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2017-10-13T04:20:03+00:00

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I have really enjoyed working with you guys and look forward to a successful 2013. From the moment we started with TAS I have seen value. The figures are accurate, you are accessible (and approachable!) and most of all – you are cool people!
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"Sophie is so professional – careful, attentive and punctual – she has made managing my accounts not just easier, but a whole lot less stressful"
Sophie has been a tremendous support and guiding light for my business. I have continually succeeded when acting on her advice and by using her services. Her products are fantastic and her ideas and accuracy is out of this world. I would never hesitate to recommend Sophie’s services and I would invite anyone to contact me for a referral.

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2017-10-13T09:21:50+00:00

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GM, Property Styling Online and BG Property Styling

Sophie has been a tremendous support and guiding light for my business. I have continually succeeded when acting on her advice and by using her services. Her products are fantastic and her ideas and accuracy is out of this world. I would never hesitate to recommend Sophie’s services and I would invite anyone to contact me for a referral.
Sophie has the spirit of the Entrepreneurial Business Owner! Whether she is running a successful single family website, creating a product for small business owners or running her own bookkeeping agency she is always right on track as to what small business needs. If you want to speak to someone who not only knows what business owners are going through-she also does something about it- then don’t miss out, connect with Sophie! She is someone who can not only think outside the square- she has true strategic thinking; which is often spoken about but is rarely truly placed into action.

Sue Heins
Councillor at Warringah Council

2017-10-13T09:25:16+00:00

Sue Heins
Councillor at Warringah Council

Sophie has the spirit of the Entrepreneurial Business Owner! Whether she is running a successful single family website, creating a product for small business owners or running her own bookkeeping agency she is always right on track as to what small business needs. If you want to speak to someone who not only knows what business owners are going through-she also does something about it- then don’t miss out, connect with Sophie! She is someone who can not only think outside the square- she has true strategic thinking; which is often spoken about but is rarely truly placed into action.
Sophie is an amazing business woman. She is able to take the complexities of business and break them into manageable pieces for small and home based business owners to work with. She’s clever, creative, supportive and very generous. She’s the reason that so many small businesses are doing so well. If yours is a small or home based business then Sophie is someone you need to know.

Anne Maybus
Writer and Content Creator, Clever Streak

2017-10-13T09:26:35+00:00

Anne Maybus
Writer and Content Creator, Clever Streak

Sophie is an amazing business woman. She is able to take the complexities of business and break them into manageable pieces for small and home based business owners to work with. She’s clever, creative, supportive and very generous. She’s the reason that so many small businesses are doing so well. If yours is a small or home based business then Sophie is someone you need to know.
Sophie is efficient, direct and gets the job done. She responds quickly, keeps me updated and has a way of simplifying things and making my life easier. She is all about efficiency and that’s what makes it great to work with her, I highly recommend her to anyone who wants someone to efficiently look after their books and she is great value for money too.

Adam Dobson
Strategic Resourcing Manager

2017-10-13T09:28:24+00:00

Adam Dobson
Strategic Resourcing Manager

Sophie is efficient, direct and gets the job done. She responds quickly, keeps me updated and has a way of simplifying things and making my life easier. She is all about efficiency and that’s what makes it great to work with her, I highly recommend her to anyone who wants someone to efficiently look after their books and she is great value for money too.
I’d been stalking Sophie for a while since I saw some of the great work she did at Ideas Book. What she’s up to at the SOHO Agency is equally impressive and I’m delighted to have someone working in this space who I feel so confident referring onto others. Keep being brilliant Sophie!

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Founder and Director, Flying Solo

2017-10-13T09:30:45+00:00

Robert Gerrish
Founder and Director, Flying Solo

I’d been stalking Sophie for a while since I saw some of the great work she did at Ideas Book. What she’s up to at the SOHO Agency is equally impressive and I’m delighted to have someone working in this space who I feel so confident referring onto others. Keep being brilliant Sophie!
Sophie is an incredibly savvy business owner, for whom I have great respect. She has always been very clear and detailed in her instructions, is always very focused on her business objectives, and displays a business model that you can aspire to as a small business owner. I have no hesitation is recommending her work at The Accounts Studio.

Kristy Smith
Director, Virtual Elves Outsourcing Solutions

2017-10-13T09:30:59+00:00

Kristy Smith
Director, Virtual Elves Outsourcing Solutions

Sophie is an incredibly savvy business owner, for whom I have great respect. She has always been very clear and detailed in her instructions, is always very focused on her business objectives, and displays a business model that you can aspire to as a small business owner. I have no hesitation is recommending her work at The Accounts Studio.
I have had many a chat with Sophie on the networking circuit. Sophie has a strong profile and reputation within business circles and I wouldn’t hesitate to recommend her to any soho needing direction, support and encouragement. I have a passion for educating small business myself and wholeheartedly support Sophie in her endeavour to actively reduce costs for those who may be unintentionally making uninformed decisions relating to business management. Many business owners are unnecessarily outsourcing tasks which are misdirected or can be achieved inhouse.

Gai Hook
Virtual Sales Strategy

2017-10-13T09:32:05+00:00

Gai Hook
Virtual Sales Strategy

I have had many a chat with Sophie on the networking circuit. Sophie has a strong profile and reputation within business circles and I wouldn’t hesitate to recommend her to any soho needing direction, support and encouragement. I have a passion for educating small business myself and wholeheartedly support Sophie in her endeavour to actively reduce costs for those who may be unintentionally making uninformed decisions relating to business management. Many business owners are unnecessarily outsourcing tasks which are misdirected or can be achieved inhouse.
I’ve worked with Sophie as a contributor to Confessions of a Mumpreneur – a fantastic book that she dreamt up, edited and produced. Apart from producing fabulous books that help so many others realise their entrepreneurial dreams, Sophie is an astute business person who is making her mark on her own terms. Watch this space – I’m sure we’ll see and hear a lot more from Sophie Andrews in the years to come.

Jennifer Dalitz
Gender Diversity expert, Career Coach, Award winning blogger on women, work & leadership @ www.TheSheEOBlog.com

2017-10-13T09:50:01+00:00

Jennifer Dalitz
Gender Diversity expert, Career Coach, Award winning blogger on women, work & leadership @ www.TheSheEOBlog.com

I’ve worked with Sophie as a contributor to Confessions of a Mumpreneur – a fantastic book that she dreamt up, edited and produced. Apart from producing fabulous books that help so many others realise their entrepreneurial dreams, Sophie is an astute business person who is making her mark on her own terms. Watch this space – I’m sure we’ll see and hear a lot more from Sophie Andrews in the years to come.