The small business cash flow checklist for 2019

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Cash flow is the reason the majority of small businesses fail. Make sure your business survives and thrives in 2019 by ticking off our cashflow checklist.

cash flow

Only half of new small businesses survive the first four years, and countless more established enterprises fail every year, according to Mccrindle research. One of the main reasons for this is poor cash flow, a problem that plagues countless businesses of all shapes and sizes.

Make sure your business is a success story not a statistic by ticking each item on our cash flow checklist for 2019.

1. Review your cash position

It's a good idea to review your business's position at the end of every month so that you can get a clear idea of the health of your cashflow. If you haven't done so in the past you can do this retrospectively for the last 12 months to gain insight, then commit to reviewing monthly over 2019. To get started calculate your:

  • Opening balance: the cash your business had available at the beginning of the month.
  • Monthly cash inflow: the amount of cash you've been paid during the month.
  • Monthly cash outflow: the amount you've spent during the month.
  • Net cash flow for the month: Monthly inflow minus monthly outflow.
  • Closing balance: the amount of cash your business has at the end of the month.

Once you've performed the above calculations you'll be able to see when and why your cash reserves have been low, then take steps to address the source of the issue.

2. Negotiate better payment terms and streamline invoicing

Overdue invoices are paid an average of 11 days late in Australia, according to analysis from Dun and Bradstreet. If your business's cashflow is low there's a good chance it's because of late invoices, poor invoicing practice or unfavorable payment terms.

Take a moment to review your payment terms, and consider shortening them, adding late payment penalties or even prompt payment discounts. Put systems in place to ensure you send invoices the moment work is completed, and then remind customers regularly if an invoice is overdue. Software like Xero or MYOB can help you automate these reminders.

It's also worth taking a closer look at your payment terms. While 30 days is standard you can require much shorter payment times if your customers agree to the terms. Requiring a deposit of between 10 and 50 per cent of total invoice amount before starting a large project is also worth considering.

3. Manage suppliers and stock intelligently

Holding too much stock or paying suppliers in advance are common causes of small business cashflow problems. To remedy this review your stock levels often to identify items that aren't selling for extended periods. Look for suppliers who will sell you stock on an 'as needed' basis so that you never waste money paying for stock that sits in a warehouse.

Last of all, try to negotiate your supplier terms. Longer payment times will keep funds in your accounts a little longer should you need them, improving your day-to-day cash position. For the same reason you should always pay supplier invoices on their due date, not a day before.

4. Consider debtor finance

Mccrindle data shows one in five Australian businesses seek a business loan or equity each year, and three out of four of these are to address cashflow shortfalls. Debtor finance is particularly popular. This loan product smooths out your business's cash flow by advancing you funds upon issuing of invoices, then requiring repayment when invoices are settled by your clients.

If late payments are causing you cash flow trouble debtor finance is a simple solution. Get in touch with the team at Classic Funding Group today to find out more.

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