4 Cash Flow Management Tips For Australian Business Owners
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Studies by The Australian Securities and Investment Commission uncovered that nearly 40% of businesses fail due to poor cash flow. Maintaining strong cash flow requires business owners to consistently review the cash balance to make more informed business decisions. Finding the right strategies for your business can be confusing, which is why sending invoices immediately, reviewing items in inventory, planning for large purchases, and retaining multiple funding sources are common tips to consider implementing.
How To Manage Your Business Cash Flow Better
Send Invoices Immediately
The main way your business receives cash is from invoiced sales. Many small businesses don’t have full-time staff in the accounts payable department, leading to lags in the invoicing function. However, invoicing should be a top priority since the sooner you send an invoice, the sooner you will receive payment. Generating a consistent policy surrounding the timing of invoicing can help your business create a steady flow of cash. It might also be a good idea to limit the time you allow for payment, and to also set up some follow-ups for when an invoice is overdue which can be a great automation to add to improve your businesses efficiency.
Review Items In Your Inventory
Businesses that hold large levels of inventory need to consistently review the items sitting on the shelves to determine if they need to be written off. Businesses in the allied health sector won’t retain high levels of inventory compared to those in the construction and manufacturing industries. If you notice supplies or products that aren’t moving, consider selling them off at a discount and refraining from purchasing them in the future. Offering a discount for products that aren’t moving fast allows your business to recover a portion of the product cost, improving cash flow.
Plan For Large Purchases
Large purchases, such as new equipment, should be planned for. Many small businesses don’t have the funds to purchase the equipment outright, calling on the need to understand the financial impact on your business. When you know your business needs new equipment, consider allocating money to that cause or drawing on other funding sources instead of letting your savings account take a major hit. This ensures your cash balance won’t fall to a level that puts your business in danger. Planning for large purchases well in advance can also be done by finding little ways to save money in your business, and putting those savings towards the larger purchase.
Retain Multiple Funding Sources
Each business, regardless of size, should retain access to multiple different funding sources. Your contributions alone sometimes aren’t enough to cover upcoming obligations, meaning your business should consider retaining a line of credit. A line of credit allows your business access to needed funds on demand with flexible repayment schedules. This can bridge any gap in cash flow and give your business the money needed to continue operations.
Cash flow management is an issue that many business owners struggle with; however, finding the right strategies is essential to ensure a successful and profitable business. Another important aspect of running a business is your insurance. Every small business needs insurance policies to cover any liabilities in their operations, which is why you should use our instant quote generator, where you can get an estimate on market-leading insurance in seconds! Simply enter your occupation and expected revenue to get started. This is a great starting point when reviewing your existing policies and uncovering the right avenues of change.