Cutting through a cash flow crisis: 6 tips to make SME money management easier
Cash flow solutions don't have to be wildly complex. We take a look at some solutions suitable for just about any SME.
Cash flow is the lifeblood of any company. Especially when you're first starting out – you need to be able to meet day-to-day expenses without putting the whole enterprise in jeopardy!
The good news is there are a range of ways that you can make cash flow management much more straightforward.
1. Automate cash flow forecasts
When you start a new business, there's a certain amount of financial admin that needs to be done.
One of the most important tasks is cash flow forecasting. It helps you determine how much is coming in and going out over a set period of time.
Every business is different, so this might be done on a monthly, quarterly or even yearly basis.
Now, the bad news is that it's not necessarily easy to do if you don't have financial training.
But there are a variety of automation tools available.
To point to one example, Thriday is able to look at your incoming and outgoing funds, and use this data to generate cash flow forecasts for your business. It can also use this data to generate your projected tax, too.
Having this information at hand allows you to carry out more effective planning. This information gives you insights into the best time to make major purchases or consider expansion. Conversely, it can also give you insights into when it's time to pull back a bit, too.
2. Use debit cards and accounts effectively
In the early days of a business, founders often have some overlap between their personal and business finances.
This isn't sustainable for long, though. It's important to separate accounts as the business expands.
This way, there's reduced potential for conflict of interest, as well as greater transparency around the business' income and expenses.
It can also be helpful to use several different accounts for a range of different purposes. This way, you're able to get a clearer breakdown of your expenses, and tailor your internal budgeting process accordingly.
Thriday allows you to create separate accounts for purposes like invoices paid, staff wages or GST, to name a few.
Thriday also allows you to attach a Visa Debit card to these accounts. This way you can make purchases and have access to easy cash flow, but you don't have the same risk of debt that can accompany traditional credit cards.
3. Automate invoices
Manual invoices may be fine when you're starting out and only dealing with a handful of clients. As you scale your operations though, keeping a manual system is a recipe for not getting paid.
You might miss key dates, overlook important details or end up in a payment dispute.
By investing in an automated invoicing process, you can streamline the process significantly.
Some services also allow for customisation, too. Thriday's automated invoicing system allows for invoice scheduling, payment reminders and quoting.
You're also able to attach images to provide proof of delivery or completion, and offer incentives for early payment.
In short, this means you're able to ensure that invoices are sent on time and get a clear indication of when you should expect to be paid. This makes projecting and managing your cash flow significantly easier.
4. Negotiate payment terms with suppliers
One of the biggest cash flow killers is having a whole heap of expenses hit at the end of the month, quarter or financial year.
Suppliers and creditors need to be paid, of course – but if you're paying everyone at once, you're probably going to be taking a pretty big hit to the hip pocket.
Fortunately, many creditors are able to negotiate payment terms.
When you're joining up with a new supplier, make sure you take a close look at what their payment terms are, and whether they can be negotiated at all.
By doing this in conjunction with your cash flow projection, you're able to better set yourself up for success and reduce the risk of cash flow issues.
5. Conduct credit checks on clients
Plenty of promising businesses have been sunk by a customer's credit woes.
If you've overcommitted your stock or services to a client that can't (or won't) pay their bill when it comes due, it can cause serious issues for your company.
It can disrupt your cash flow, which in turn can affect your day-to-day operations.
To minimise risk to your business, it's worth conducting third-party credit checks on prospective customers. You'll be able to ensure that customers are in a position to pay your invoices when the time comes.
It can also prevent you from doing business with companies that may potentially cause you problems down the line.
So protect your cash flow and the future of your business – make sure you use credit checks effectively.
6. Minimise tax by claiming all of your eligible expenses
When you run your own business, you're able to claim a number of tax deductions and benefit from certain tax incentives.
Your accountant should be able to provide you with a detailed overview of what you can and can't claim. You can also find information on the ATO website.
To claim your expenses back, you'll need to keep track of all of your receipts. Some people do this manually, but with modern technology there are far easier ways to manage the process.
Thriday allows you to simply snap a pic of your receipts or email them to your Thriday account. It will then automatically reconcile them, allowing you to see where your expenses are at a glance.
By claiming your eligible expenses, you'll be able to have greater access to funds and free up more cash flow for your company.