There are a few simple steps that business owners and managers can take to improve cash flow and have increased flexibility, greater efficiencies and potential growth opportunities. These points below will make a difference to the cash flow situation within your business and are also very easy to follow.

Create a cash flow forecast

This is an estimate of the amount of money you expect to flow in and out of your business typically over a financial year period and provides a better understanding of where surpluses and shortages might arise, and assists with making business decisions such as planning new purchases or the timing of new borrowing facilities.

Invoice promptly and action follow-up

The sooner the invoice goes out the sooner you can be paid. Review your payment terms, ensure that you can identify in a timely manner when clients are overdue and have processes in place to follow up with the clients promptly. Various accounting software packages and add-on programs have these capabilities to reduce the burden on business owners and administrative staff. Other suggestions to consider are to invoice progress payments, ensure you have electronic payment options such as BPAY, and offer early payment discounts.

Review payment terms with suppliers/creditors

There are often opportunities to negotiate better terms with suppliers – take some time to review current supply contracts and take advantage of any discounts for prompt payment or extended payment opportunities. It may also be worthwhile to seek competitive suppliers and obtain comparative quotes.

Maintain a good relationship with your bank

Meet with your business banker regularly to discuss your current facilities and business position to enable a better understanding of the terms of these facilities as well as other available options. For example, there may be better interest rates available, reduced fees, more convenient ways to pay or the availability of credit. There is also the opportunity to put your cash to work and transfer excess funds into high interest savings accounts which can be of benefit for short periods of time and doesn’t lock away access to your cash.

Keep up-to-date with your tax obligations and liabilities

It is important to forecast your tax and superannuation liabilities and ensure all lodgements and payments are made on time. Directors of companies are personally liable for unpaid PAYGW and superannuation payments. Banks are hesitant to lend for any ATO liabilities and will request ATO running balance accounts when lending. The ATO may negotiate payment plans providing all lodgements are up-to-date, however the ATO general interest rate is currently at 9.01%.

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