New year, new cashflow – part 2

New year, new cashflow – part 2

Most of us relish the year ahead, thinking how we’ll change things for the better. But once we’re back in the office instead of on the beach or checking out the accounts payable rather than the cricket scores, our new year resolutions might seem like impossible delusions. ‘There are some simple ways to ensure that 2015 doesn’t become the year of the cashflow woes,’ said David Henderson, founder of CashMaxforecaster.com and CEO of accountancy group ROCG. ‘A little extra advance planning though can mean the difference between boom or bust,’ he said. Read Tips 1 to 5 here.

6. Sweat the small stuff

A small increase in the profit margin of each and every sale – combined with more customers and stronger positioning against competitors – can significantly boost cashflow. Small efficiencies can also do much for the bottom line. While it might not be thought fashionable to sweat the small stuff, it’s the little things that keep customers coming back for more and an eye for detail the keeps cashflow under control.

There are some simple ways to ensure that 2015 doesn’t become the year of the cashflow woes.

7. Cut costs

You don’t have to go the full Scrooge to cut costs. After all, shrinking a business isn’t the best way to guarantee an effective cashflow. Only give the gifts that count; look at the expenses that generate the results. If there’s spending that’s not going anywhere, stop it before you too wind up at a dead end. Resolve: If it’s not generating income, don’t spend it.

8. Sort your suppliers

Did some suppliers fall off your Christmas card list? Have a clean-out and review old agreements. Use the new year to renegotiate better terms and conditions, cheaper fees or added value from suppliers.

9. Embrace chaos

Monitor the market and see what others are offering. Shop around and take advantage of any volatility that could see a good return or an opportunity to dispose of seemingly unsaleable stock.

10. Credit only where credit is due

Some SMEs survive on a boom-and-bust cycle. When customers want to spend up big, check their credit before celebrating. If in doubt note the warning signs, tighten your terms and conditions or initiate a strict cash-on-delivery or EFT – electronic funds transfer – policy. Putting the squeeze on doesn’t need to be a permanent preoccupation – 1 July provides the perfect opportunity for review.

11. Let the banks pay

Accepting credit-card payments means the issuing financial institution, rather than your business, carries the risk. So this year why not take advantage of the banks’ generosity and let them give the gift of an interest-free period?

12. Tax & super don’t go on holidays

It can be easy to overlook setting aside extra cash for to cover regular outgoings during the year’s financial fluctuations. Payroll tax and superannuation levies don’t go on holiday, even though staff do. Take note of due dates, set aside adequate funds in a holding account, and don’t be tempted to use this money to compensate for a drop in cashflow. Be aware that increased sales attract extra GST, so plan ahead.

13. Spend other people’s money, wisely

Building business based on borrowing is a well-practised principle. Ensure that any sudden solution adopted to stump-up a slump doesn’t become a long-term liability. Carefully consider the borrowing terms. Unless needing backing for major, long-term capital investment, short-term options such as an overdraft or credit-card payment might be enough to tide your business over. If family or friends are part of your cashflow rescue plan, ensure their agreement well before a loan is needed. Professionalism remains essential. Prepare a written agreement that details all terms and conditions and have it signed by all parties, well before breaking out the bubbles to celebrate.

14. Don’t let it rain on your parade

Having a respectable, additional cash reserve in a separate, high-interest-bearing account could mean that every financial cloud literally has a silver lining.

15. Keep it real

Financial reports need to clearly and accurately detail the basics:

  • what funds are available today
  • what is tied up
  • what is owed

If you haven’t already done so, make a new year’s resolution to keep financial reporting real, and monitor your cashflow daily for many happy returns throughout 2015.