As Australia moves towards economic recovery, it is time to get past the challenges brought about by the pandemic. The past months have been troubling to most businesses and some just didn’t know what to do. The global health crisis, coupled with government-imposed lockdowns, may have left businesses with a lot of unfinished work, uncollected payments, and excess inventory. This month may even be a more stressful time for business owners as the government rolls out additional relief for businesses. To be eligible for certain government relief, businesses need to be on top of their finances. How do you do this when work was slow, bills are piling up, and taxes and other such requirements need to be completed.
Here, we list four tips to manage cash flow to get your business back on track:
Make a financial to-do list
First things first, you need to know exactly what you need to get done for the next couple of weeks. What are your priority as a business? Which bills need to be paid first? When should you follow up on unpaid invoices? When do you need to file for taxes? Do you have payroll coming up?
One of our tips to manage cash flow is to list all your tasks will help you get organized and allow you to decide which things need to be prioritized. Also, this will help lessen the stress as you finally have a clear picture of what you have to do and you know you’re in control.
Send out your invoices
Speaking of important tasks, perhaps one of the first things you must do is to send out any invoices. Even with the moratoriums in place, there are no prohibitions from sending out invoices. Second of our tips to manage cash flow is to remain timely in sending out invoices even if debtors are given extra time to pay them off. This way, you can get the payments you need to keep things going for the next few months.
If you were able to send out all your invoices timely, you can follow up on them now. Don’t wait for your overdue invoices to pile up. Remember, creditors who make the first noise, make the loudest noise. Or you can hire a professional debt collection agency to follow up on any outstanding balances and collect the payments, so you get the cash you need as soon as possible.
Do a cash flow forecast
Doing a simple cash flow forecast is the third of our tips to manage cash flow to help get you through even toughest times. And there’s none more important a time to do this than now. So many things, business wise, have happened in the past months. Conduct a forecast for the remaining months of the year and the first quarter of next year using data of your expenses and sales from the previous years.
This way, you can get a clearer picture of how much cash your business will need to operate comfortably in the next couple of months. Use this forecast to come up with a more efficient budget, more effective invoicing terms, and other such strategies to get the money your business requires. You can do the forecast with the help of your accountant as well as the use of an accounting software. Also, make sure that all your financial data are accurate and up to date.
Review your credit terms
Late payments are among the major causes of cash flow problems for a lot of businesses, especially small and medium enterprises. Avoid this issue by reviewing and adjusting your credit terms. Consider negotiating more efficient payment terms with your current slow-paying customers.
It’s also best to implement more stringent terms for your new clients. You can also review your invoices and consider taking out invoice financing in exchange for the collectibles.