Business Cash Flow Tips
In order to increase your profit margins and keep your business cash flow ticking over, first you'll need to acknowledge and control your brand's expenses.
According to online accounting software giant Xero, only 54.2% of Australian small businesses are cash flow positive. A lack of short term cash flow is one of the primary reasons why businesses seek finance or capital investment, which can only add extra pressure to traders if not managed correctly - so how do you get it right?
Seven Tips On Managing Business Cash Flow
By definition, positive cash flow is the term used when cash coming into the business is greater than cash going out during the same period. More or less, it means that you’re not constantly falling short when it comes to paying for your expenses and are actually able to turn a profit.
In theory, it doesn’t sound all that difficult, but many operators come undone simply by not planning ahead or staying on top of their paperwork. The good news is that there are several minor things you can add into your routine to keep your business cash flow healthy.
Stay On Top Of Paperwork - The cash flow of your business is only as good as your in house accounting, reporting and paperwork, so it’s crucial that you stay on top of this and maintain it. Pay attention to dates, so that you can easily grasp the financial state of your business.
Stick To Payment Terms - All too often, brands fall into the trap of being too lenient with their customers or regular accounts. Unfortunately, all it takes is one late payment from them to throw your own expenses out of sync, so stay on top of what is due when.
Review Payment Methods - In the digital age, consumers expect a variety of payment methods that are both safe, convenient and fast. If your brand or business is using third parties such as Afterpay or Paypal, ensure that you are factoring in the extra fees that they take.
Reduce Overheads - By minimising your outgoing expenses, you’re automatically going to improve your business cash flow. Consider things like utility bills, the price of rent, evaluate your insurance policies, reduce overtime wages, and weigh up if you’re holding too much stock.
Separate Business and Personal - In the early days of starting a business, particularly if it’s a start up or “side hustle”, many operators make the mistake of blurring their business and personal finances. If not separated, it’s impossible to get a scope of your true cash flow.
Have A Rainy Day Fund - A cash reserve provides the cushion you need to manage unexpected events. While it also gives you the confidence and finances you need to grow your business, it also protects you from coming unstuck from a lack of cash flow if you need it.
Keep Accounting Simple - Seek out the services of a professional accountant or bookkeeper if numbers are not your forte. As they are generally experts in the financial side of running a business, accountants can help you to turn things around before they get out of hand.
A Professional Insight On Business Cash Flow
If understanding your finances or the in’s and outs of business finance isn’t your strong point, then it may be reassuring to know that you’re not alone. In fact, many businesses (big and small) enlist the services of an accountant and business advisor in order to free up their time, while knowing that their financial obligations are already taken care of by the professionals.
What you choose to invest in or shy away from as a business owner can have a domino effect that ripples through your entire team - so are you confident in your financial choices?
At Muro, we are more than just accountants - we offer our clients strategic business advice and ongoing support to help them reach their business and financial goals. Get in touch with us at Muro today to ensure that you’re on the right path for success as we head into 2021.