Top Tips To Better Cashflow….The Key To Business Success
Are you often frustrated by a lack of Cashflow?  Keeping your business growing in these tough economic times can be challenging, but understanding the importance of Cashflow will certainly help.  Cashflow differs from profitability which is why we often find ourselves scrambling to find the money to pay our taxes, suppliers or ourselves!
We are all too aware of the effects of the ‘credit crunch’ which has been driven out of the US and more recently Europe.  When there was a great deal of talk 18 months ago about the recession a lot of entrepreneurs steeled themselves against the impending tidal wave of gloom that was being forecast by the media.  But the tidal wave didn’t hit as predicted, instead it has been a sneaky swell with the occasional rip, which unfortunately for many is now catching up with them.  Those who are successfully riding the waves are doing so because they have managed their Cashflow effectively.
So what can you do to keep afloat?
Get the money flowing in – chase your customers for payment
Basically, Cashflow refers to the money coming in and out of your bank account.  This includes the money you take for yourself, use to invest in assets and stock, pay your staff and suppliers and your marketing spend.  In order to pay for these items you have to make sure you are being paid as well!  The importance of keeping a close eye on those who owe you money is imperative in lean times.  Can you shorten your payment terms?  Provide incentives for early payment?  Review your outstanding invoices and stop offering lines of credit to slow payers at least until they are paid up?
It may seem like tough love, but this is business and you are not a charity!  AND above all, be clear what your terms are from the beginning, start as you mean to go on.  If you offer 10 days to pay, send a reminder on day 11 – they will soon learn.
Review your stock constantly
If you are a retailer, then your stock levels impact on your Cashflow.  If you buy goods in advance to resell, then everyday they are sitting there they are dead money to you.  They effectively have no real value until you can convert them into cash!
For retailers, the importance of understanding what is selling and what is not is crucial to your business.  Order the wrong goods and they will not sell.  Intelligent buying is the key to your Cashflow.  If you stock has been sitting on the shelves for more than 6 months, chances are it will not sell at full retail price.  I strongly suggest inventive sales to clear it out of the store.  If customers come in and see the same products on the racks over and over again, they will not be inspired to come back.
Understand when your money flows in and out
There will be certain times when more money leaves your bank account than comes in.  Do you know when that is?  Often it is the 20th of the month when supplier payments are due, or when payroll and taxes are due.  Know what needs to be paid when, even if it is a guesstimate!  Get it out of your head and into a system.  That way you will be incentivised to get the money in to pay for the upcoming outgoings.
Xero has a great tool for managing this – Contact us to find out more.

Plan for your taxes
Nothing can cripple a business more than unexpected tax payments.  Chances are if you are profitable, you will need to pay tax.  Planning for taxes is easy if you start as you mean to go on.  Set up a separate bank account, monitor your profits and put away a set amount each week.  When the time comes to pay, the money will be sitting in your tax savings account.  It really is that simple!
For those of you who are new to business then it may seem as if you have no tax to pay in the first year.  This is not technically correct! If you have made a profit you will have tax to pay, but the payment is deferred.  This does not mean you can ignore it.  In fact, if you do, you will be in for a huge shock, as not only will be have to pay tax on year ones profit, but you also need to get up to speed on year two as well.

Balancing Act offer a great service of monitoring your profit and advising you on how much money you need to put away for your tax.  Contact us to find out more