According to the 2016 Australian Securities and Investment Commission (ASIC) corporate insolvencies report, inadequate cash flow was the number one cause of failed SMEs.
We understand that cash flow is fundamental to the success of any business, therefore, it’s important to be hands-on in protecting your business cash flow rather than react to the issue when it becomes a serious problem.
What can you do to improve your business cash flow?
1. Understanding the financial forecast of your business can help you make better decisions throughout the year, especially when there are any shortages or surpluses in cash. It’s critical for you to check your monthly cash inflow and outflow to see if your financial forecast is on track.
2. It’s important for you to protect your credit. Your business can become exposed to bad debts when you provide services on credit terms. Chances are, when you do not receive immediate payment or worst, when you do not receive payment at all, this can put your business in a vulnerable financial position.
If you were to decide that offering credit terms to buyers is still the appropriate channel to go, you have to consider other factors such as the bank. Would the bank be comfortable providing funds to your business if the debt was secured or if your business had a bad debt provision? It’s not too late to think about it.
3. Another way is to manage your debtors’ accounts thoroughly. You need to ensure that you have a good insight and understanding of your buyers, so that you can set up the right credit policies.
4. Improve receivables by offering discounts to your customers who pay their bills rapidly. You can also try and ask your customers if they can make deposit payments at the time orders are taken. It is also important to issue invoices promptly from your end and follow up payments immediately when they become overdue.
At FlexiFundIt, we provide funding and payment plan software for a flexible and easy payment solution designed to improve your business cash flow and income. For more information and tips to maintain, protect, and improve a good cash flow, please get in touch with our team today:
P: 1300 850 890