Small Australian businesses are falling behind when it comes to paying invoices on time. In fact, MarketInvoice found that Australia is the slowest country in the world at dealing with outstanding invoices. This is a clear example of our laid-back attitude towards finances and creates the potential for serious cash flow woes.
For a business to run efficiently, it needs to move money in and out. How can you successfully balance your books and make future predictions about your business if you don’t have an accurate picture of your finances?
Use these three tips to revitalise your finances and get your cash flowing again.
1. Check and Recheck Credit Ratings
There is such a thing as being too trusting, especially when trying to run a business. Many companies encounter problems when they fail to carry out credit checks on new customers, partners or suppliers.
If you’re about to sign a major contract, you need to know the client will be able to pay its bills. Listen to the buzz in your industry, look into other people’s finances and trust your gut. The last thing you want is to find yourself with overstock or an obligation you can’t fulfil because you put your trust in someone unreliable.
Be sure to also keep an eye on existing accounts, and act quickly if you notice current clients falling behind. Send reminders, establish open lines of communication and, if they consistently struggle to pay on time, see if you can find a solution that works for both parties.
2. Keep an Eye on Profit Margins
It can be easy to lose sight of exactly how the money you charge for your products or services translates to the actual goods offered, so set aside time to find out exactly where you stand.
Are your profit margins shrinking as your workload increases? Are components going up in price while your rates stay static? If so, your margins will feel the pinch. When your profit margins start running dangerously low, you’ll discover a massive knock-on effect on your gross margins and, by extension, your cash flow.
Carry out a regular ‘cost of goods sold’ analysis to find out which product lines are working well and which should be cut or have their costs adjusted.
3. Be Flexible by Going Mobile
In a world that moves so quickly, there’s nothing worse than lagging behind. Take your accounts online with mobile accounting apps to make it easy for you to keep cash moving – no matter how many other tasks are on your plate.
Don’t tie your finances to your office desktop – make them as mobile and flexible as your business needs to be. With cloud-based accounting software like QuickBooks Online, you can instantly check who owes you what, even when you’re on the move.
What’s more, you can send reminder emails quickly and easily from your mobile phone or smart device in a matter of moments. It doesn’t matter where you are – you’ll be able to update customer data, follow up on late invoices and make payments on your outstanding accounts.
Seize control of your finances and get that cash moving again by implementing these strategies and making your cash flow problems a top priority. If you’re still struggling to see the light at the end of the tunnel, check out our survival strategies for cash-strapped businesses.