Cashflow Overhaul Guide

Up-to-date and accurate cashflow management is the key to boosting your business. It helps you avoid the risk of overspending and making uninformed financial decisions which will lead to increased overheads.

A simple line by line cashflow analysis LIKE THIS ONE will help you to track your cashflow. Online accounting packages – like Xero and MYOB – are the most effective tools for keeping on top of your cashflow. These packages give you a clear line of sight on your direct and indirect costs.

2.  Work on reducing your overheads

Overheads are inevitable, but there are some straightforward approaches that can help to reduce your overheads and increase your returns:

• Renegotiate with your landlords or financiers. The Bentleys Finance team works with business owners in every industry to help them to negotiate better rates for their business and personal debts. A small downward shift in interest rates can make a significant difference to your business’s cashflow. Contact our team here.
• Sell any unnecessary assets and equipment. As well as providing a quick cash injection to your business, moving underutilised resources will also reduce storage and insurance costs.
• If you require new assets, consider leasing. If you need a piece of equipment for a short period – leasing will reduce the initial purchase cost and will not require purchase of insurance

What are the main cash outflows and inflows for your business?  Can you delay some main outflows or speed up some main inflows to get a quick injection of cash? For example, can you speak to your main supplier and ask if you can pay on 45-day terms instead of 30 days?  Can you issue invoices quicker or reduce your payment terms to 14 days instead of 30 days?

It’s also important that you invoice instantly to receive payments on time. Getting paid as soon as a job is completed will help you to cover business costs. Changing the flow of monies going out and coming in can alleviate some of the pressure on your working capital.

Look into the future and prepare achievable cash forecasts based on your incoming revenue, outgoing payments/commitments, tax and super obligations, etc.

Analyse each line item critically and be honest and realistic. Accurate calculations help you to understand how much cash you need on a day-to-day, week-to-week and month-to-month basis.

For extra protection, can you keep a cash reserve aside for unexpected events? Machines break down, urgent jobs sometimes require immediate casual labour hire. Having reserves to cover the unexpected costs can help to navigate through these situations (just make sure the reserves are topped back up!)

If you still find your cashflow coming up short, it’s time to start thinking through some options for finding the funds you need. Have you considered:

• Applying for finance – obtaining a loan or finance can provide you with the working capital you need to fulfil obligations, but make sure that it’s sustainable.
• Shopping around for new suppliers – many suppliers have incentives and offers to attract new customers – just make sure that if the incentive is an extension on your payment timelines, you rework your forecast and schedule the payment before its due date!
• Move to premises with cheaper rent – while it may not be the easiest idea to execute, it could be one of the most cost-effective if you can move to a location with more competitive leasing costs, or if you can reduce the size of the space you operate from.
• Sell excess assets, old stock or equipment. Look at sale and leaseback of premises.
• Find a new business partner to inject equity.

If your business is ready for a boost, we can help you with effective approaches. We have extensive experience dealing with businesses across many industries, and managing the communication with stakeholders such as creditors, financiers, ATO and ASIC.

We don’t offer ‘band-aid’ solutions  – we provide commercial, structured advice at every point to help you to achieve long-term outcomes.

Over our long history working with businesses of all shapes and sizes – our experience is that businesses get the best outcomes when they start with simple steps.

Let us help you to get where you want to be.