Cash flow

The most important task for any business owner is to make sure you have enough cash coming in to your business to pay your bills and to meet your regular commitments.

Tips to improve cash flow

Aswell as working on improving your profits you might collect your debts quicker, reduce your stock levels or slow down payments you make to your suppliers to keep cash flowing into your business. Keep your records up to date so that you can understand how your business is performing, better manage your cash flow and increase profits.

Reconcile your transactions monthly and prepare reports

  • Use an accounting system, such as QuickBooks or Xero, to reconcile your bank accounts regularly, at least monthly.
  • This will ensure that all your business transactions are recorded.
  • Make sure that your bank balance in your records matches your bank statement.
  • Setup bank feeds to save time on entering transactions.
  • Use bank rules to automatically allocate recurring transactions to the correct account.
  • Having correct transactions will give you accurate and valuable reports .
  • Prepare and review profit and loss, balance sheet and cash flow reports regularly.

Review reports to understand how your business is performing

  • Your balance sheet will tell you how much is owing to you and if you owe more than you currently have.
  • Maintain enough working capital (current assets less current liabilities) to pay at least the next month’s outgoings.
  • A cash flow report will show your income and expenses for each month.
  • It will show you the amount of cash left after paying your bills.
  • It will identify trends in your cash receipts and payments over time.
  • Analyse your cash flow to identify areas which may need your attention.
  • Make sure that you are generating cash from your operating activities.
  • Identify problems before they get out of hand.
  • It will give you warning signs to help avoid future financial trouble.
  • You will know if your income is no longer meeting your expenses.
  • Prepare cash flow forecasts to work through different scenarios and to check that you can pay your regular commitments.
  • Plan ahead by preparing cash flow forecasts or simple budgets using a spreadsheet or with tools available in QuickBooks or Xero.

Take control of your accounts receivable to speed up receipt of cash

  • Invoice your customers as soon as your sale is completed.
  • Look at ways to get paid faster.
  • Provide easy payment options and include these on your invoices.
  • Make it easier for customers to pay by accepting credit card payments with Paypal or Pinch Payments (fees apply).
  • Reconcile your accounts receivable monthly to identify who owes you money.
  • Send reminders to follow up on outstanding payments.
  • Streamline your collection processes.
  • Consider sending invoices using e-invoicing. This sends the invoice direct to your customer’s accounting software to speed up the approval process.
  • Be careful who you give credit to.
  • For special or large orders request a deposit.
  • Resolve customer disputes quickly to avoid holding up payment.

Find ways to increase your sales revenue

  • Raise your prices if your business expenses are increasing.
  • Focus on your most profitable customers, products or services.
  • Increase the value you deliver to your customers or offer additional products or services.
  • Run a marketing campaign to attract new customers.
  • Improve your sale process.

Track your spending and reduce overheads

  • Review your profit and loss reports and cash flow reports regularly.
  • Compare your expenses over time to identify increases.
  • Understand where you are spending money.
  • Reduce your spending where possible.
  • Look for ways to reduce your fixed costs (eg payroll, rent, insurance) and discretionary spending (eg subscriptions, marketing, meals and entertainment).
  • Employ the right staff focused on delivering your core products and services to your target customers.
  • Negotiate prices on operating expenses.
  • Reduce cost of stock or materials.
  • Carefully manage your stock to ensure you are not holding onto unnecessary or slow moving items.
  • Sell underutilised assets.

Reconcile your bills payable, make sure you're not paying duplicate invoices

  • Scan or take a photo of your bills and add them as bills to pay in your accounting records.
  • Reconcile your supplier accounts with their statements at the end of the month so you pay the correct amount.
  • Make sure you are not paying duplicate invoices.
  • Take advantage of supplier discounts.
  • Resolve any disputes quickly to avoid disruption to future supply.
  • Up to date records will show the correct amount owing to suppliers.

Are you looking for some help managing your cash flow?

Would you like to:
  • Save time on your record keeping so you have more time to focus on other aspects of your business?
  • Reduce the stress around meeting your GST and payroll reporting obligations?
  • Have reliable data and reports to help you to understand how your business is performing, manage your cash flow, make more informed decisions and improve your business?
I’m Sharon, a registered BAS agent and QuickBooks Certified Advanced with more than 20 years' experience in the industry.Get in touch to find out how I can support you and your business to stay on top of your numbers to run a successful business.
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