Cash flow at present is a major issue being faced by numerous small to medium businesses across Australia, which according to the Invoice Market’s research is worth $76 billion outstanding invoices and $2 billion business drowning in this sea of unpaid bills. Small businesses, comprising 9 out of 10 companies, are also causing a major drain in the economy. Some major reasons that can be scrapped out are delay in payments by the large companies, poor financial management, overlooking the need of the right software for tracking and inconsistent with regular reports, forecasts and trained professionals who are more proficient.
However, understanding these problems and learning how to combat them will help small businesses to stay on top of a healthy cash flow. So, following are certain tips to look at:
Address the issue of late payments:
The bigger businesses mostly cause late payment issues for SMBs. Kate Cornell from ASBFEO stated that giant industries make the suppliers wait as long as 60 days for payment & even asking for discounts. This is one of the major reasons for cash flow that has to be tackled, and campaigns are already being run to make the large companies to pledge to pay invoices sooner.
Efficient Management System:
Small Business suffer drastically due to overspending and not having a proper well-planned budget, which leads to making purchases not being aware of the finances and thus eventually affect cash flow. Hence, it is important to take control of one’s own business, analyze the incomings and outgoings.
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Regular reports, forecasts, and cash flow statements will help to carve out a better insight into the ins and outs of your company and would help you to make better decisions, which is to understand on what model their company is running, when and how should stock be purchased and what marketing is to be invested.
Monitor Stock Levels:
Keeping hold of excess stock would result in tying up of cash and would lead to increasing of storage and insurance costs. Hence practicing good stock control will keep stock well-ordered.
Managing debtors along with having good credit policies will keep your cash flowing in. Also, follow up on overdue accounts, and if possible try to negotiate longer payment options with your suppliers. So, that you can pay after you receive payment from your customers. It won’t ooze a penny from your pocket then.
Review Banking Products:
Right banking transaction products should be used for faster transaction. Accepting payments online should be considered.
Pay more attention to customer service, use an advertising campaign to increase profits.
Reduction in overheads:
Cut down on staff overtime, control overheads and reduce costs such as power and water bills.
It is advisable to simplify and automate the accounting process of your SMBs. Cloud accounting solutions can be used to generate instant reports. Which can be further used for future cash flow predictions, to adapt and prepare.