The Domino Effect of Late Payments on Australian Businesses
The subject of late invoice payments has dominated the news heavily during the last 12 months. And with good reason! Many large businesses are taking advantage of smaller organisations and not paying within the terms of their agreement. This can be frustrating for businesses who are struggling with debt and limited cash flow. Poor cash flow can limit growth A slow cash flow can limit business growth causing major problems to both the business and the staff. Kate Carnell, the Australian Small Business and Family Enterprise Ombudsman, has been extremely communicative on this subject and believes that something must be done to aid small businesses around Australia. The summary of findings from the Payment Times and Practices Inquiry states that 12% of firms lose more than 6 hours per week chasing late payments. The review also claims that based on an average 30-day payment term, one in two businesses report that 40% of their bills go beyond the invoice terms and 20% said they were paid beyond the two-month mark. Improving your cash flow As a small business owner, what can you do? Firstly, it is important that you negotiate the terms laid out by larger businesses. Endeavour to...
Read MoreManage Your Business With A Cash Flow Forecast
Let’s cut to the chase! If you don’t know how much you have coming in and going out, how can you effectively manage your business affairs? You need a system that can track all the earnings and expenses to minimise any surprises along the way. Failure to plan will only add extra stress. Therefore keep on top of your cash flow with an easy to prepare cash flow forecast. When businesses fail, it is usually down to one thing – lack of cash flow. If your business grows too big too quickly, then cash flow can be strained. You will soon find that the cash which is going out exceeds the money going in. And trust us, that is definitely not a good thing. Many organisations fail to take into account the extra spending that comes with business growth. That can be a huge issue as too little cash flow can be the cause of bankruptcy and permanent business closure. Positive Cash Flow Positive cash flow does not occur by accident. It happens because all the pieces are carefully managed through the cash flow management system. Choosing practices such as regular invoicing of customers is a huge help in...
Read MoreUnderstanding The Difference Between A Cash Flow Forecast And A Budget
When you start out running a business, it is important that you understand some of the terms which you may come across. A cash flow forecast and a budget are two references which we will explain in more detail so you can have a better handle on the management of your finances. While there are some similarities between your cash flow forecast and budget, they are slightly different with specific uses and benefits. Both are used to further your business objectives and positively grow your business. Let’s break it down a little more. What is a Cash Flow Forecast? Your cash flow forecast allows you to plan out when you have cash and when you don’t. It explains when cash is going in, and cash is going out to help you budget accordingly. It lets you see when you will have money in the bank and take into account any loans or payments which need to occur over any given month. Your cash flow forecast can be easily updated each month to show what is in your bank account versus any project spends (fixed and variable) and income to be received. What is a Budget? Your budget is slightly...
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