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 MoreHave You Made Your End of Financial Year Resolutions?
There is always talk of New Year’s resolutions come the beginning of January. Some may relate to your personal goals while others are geared more specifically to your business. However, end of financial year resolutions are different altogether. They allow you to focus purely on your organisational goals and how your company will perform over the next twelve months. Coming up with a financial plan for your business is the best resolution you can make, especially while all the figures are still clear in your head from tax time. Armed with a solid twelve months of financials from the prior year, you can analyse your business performance and determine its financial health. Ask yourself these questions: How did your organisation fare from the previous financial year? What were your strong months? Did you see real growth? Were you profitable? Did you see a solid return on investments from your campaigns? What would you do again if the situation presented itself? What would you do differently? Build a budget Now before you go any further, it is important that you have a budget to guide your future movements. Are you planning any big purchases that your current level of cash flow...
Read More3 Simple Ways To Improve Your Cash Flow This Financial Year
As we wave goodbye to the end of the financial year for 2016/2017 and move on to 2017/2018, it is easy to get excited. A new year provides so many opportunities for growth, change and development – what’s not to get excited about! The start of the new tax year is also a great time to plan ahead to maximise your cash flow. Here are three ways to help improve your cash flow this financial year. Change those payment terms to benefit your business Are there changes you can make to your policies to ensure that money comes through the door quicker? Can you ask clients to pay upfront or place a down payment in advance on large projects, so you are not out of pocket? Could you consider changing your terms for payment to ‘in full upon completion’ rather than extending them by another 30 or 60 days upon completion? Requests like this make smart business sense, particularly for small business owners whose cash flow may not be as fluid as they would like. Set up a plan to collect late payments sooner rather than later Naturally, you hope that everyone will pay their bills on time, but sometimes that...
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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