Cash is King with Small Business – How to Address Cashflow Issues
Addressing cashflow issues is a multi-prong process. It can seem overwhelming at first, but by taking small steps, a business can come back from the brink. Control your cashflow by reviewing accounting solutions, invoices, bills, inventory and expenses.
Cash is king. This is an old adage that rings true with small business. A shortfall in cash can bring a thriving business to its knees in a matter of weeks. It could be booming one moment, and crashing the next. This is why cashflow issues are one of, if not the biggest issue with small business.
Accounting Solutions
Take advantage of the accounting software tools available – these tools e.g. Xero, can provide you with a snapshot of where your business is positioned. They can provide you with a look at your current cash position, upcoming receivables, payables and stock levels.
By maintaining a live accounting software solution, you can estimate your business’ future cash position. This can help you prepare for any upcoming shortfalls. You can make the right decisions now to avoid problems in the future.
Outstanding Invoices
Follow up outstanding invoices so you are paid – regardless of what business you are in, selling products and services can be meaningless if you don’t get paid! Take back control of your receivables:
- Implement an accounting solution so you can track your outstanding invoices;
- Ensure your invoices outline your terms clearly;
- Encourage early payments by providing a discount, and discourage late payments by applying penalties and charges; and
- Automate follow ups, and send email reminders when invoices are outstanding.
Track Bills
Manage the payment of your bills by paying on time – consider bank loans, employee payroll, tax obligations, and other business expenses.
You should take advantage of the terms of all of your bills. If a bill is due in 2 weeks, consider paying it on the last day it is due. It’s better to keep the money in your account for longer. You do not want to damage any relationships, so stay on top of your creditors. Care should be taken not to go beyond the terms.
Manage Inventory Levels
Manage your inventory levels and avoid having your cash sitting idle – having high stock levels ties up money which could be spent elsewhere.
Try to order stock as you need it, with small amounts being held in inventory. If stock is not sold in a timely fashion, it can quickly become a liability. Remember that excess stock can also increase storage costs.
Minimise Expenses
Re-evaluate your operating expenses regularly – keep your costs to a minimum. Try to:
- Review electricity, insurance, phone and internet service contracts when they are up for renewal to make sure you’re getting the best deal;
- Renegotiate your lease with your landlord; and
- Negotiate with your suppliers.
Need help?
We here at VCFO Accountants love working with businesses. We can help you take back control of your cashflow. We can provide accounting solutions, implement procedures and processes to manage inventory and address debtor and creditor issues. Let us help you stay accountable. Contact us today!