One out of five SMEs states that low cash flow prevents them from expanding the business and taking on new work. The ability to manage cash flows effectively will allow financial flexibility to take advantages of new opportunities as well as protecting businesses during financial difficult time.
Unfortunately, many business owners do not understand this concept or underestimate the role of cash flow required to run a business.
Below are a few tips for new businesses, especially start-ups, to plan and administer their cash flows:
1/ Set financial targets
- Monitor income and expenses, do your budgets and forecasts to predict the necessary cash to fund the business.
- Be realistic about your expectations against the results.
2/ Monitor debtors tightly
- Set the company policy clearly.
- Send invoices to customers on time, ideally as soon as the job is finished.
- Send timely reminder.
- Offer many payment methods to assist the clients with making payments quickly.
3/ Don't be afraid to negotiate with creditors
- Review your creditors’ policies and set up payment arrangement with creditors.
4/ Review the pricing strategy
- Review service or product offers to see if it is possible to bundle items, sell them at a higher price or provide extra features to increase their competitiveness.
5/ Engage with a good Accounting/Business Advisory firm
Accounting industry nowadays is engaging deeper with businesses to assist them with business advises and tax strategy to increase the cash flow, maximizing benefits and minimizing tax payment.
At Financial Intelligence Group, we provide clients with a mentoring relationship including business tools and strategies from big firms.
Mobile Phone: 0405 080 525