Cashflow is King
It’s not complicated, confusing or easy to manipulate, it doesn’t lie and shows the real health of a business. Even non-accountants understand cash as they all have to manage their personal cashflow – to ensure there is more inflows than outflows and managing the debt levels for the inflows in the household.
When assessing the underlying performance of a business cash is the best indicator to show how the business is performing, how healthy the business is and being able to accurately determine if your business model is viable for the long-term.
Despite the fact that cash is king, everyone understands it, and without it, a business can’t function. Businesses don’t spend enough time understanding their cashflow to be able to proactively drive improvement in the cashflow of a business.
There are four key things to consider when managing your cashflow:
Understanding the past – understanding the activity that drives cash inflow and cash outflow and the timing of these elements
Shape your future -
Make changes to your business that bring cashflows in earlier (change in payment day terms, utilise credit cards for customers to pay etc)
Take an aggressive stance to work with customers that pay you for your services. Pre-screen customers for credit history to ensure you are not generating revenue with no cashflow
Make changes on how to delay cash payments going out the door through utilising credit cards, changing payment terms, negotiating extended terms or move monthly to quarterly, delay purchasing until required
Daily cashflow forecasting helps you really manage tightly the cashflow of the business
Daily reporting on cashflow drives good discipline and an ability to make quick decisions. This reporting can show actuals versus forecast.
Making even a small change can make a huge impact on ensuring your business is maximising its cashflow position.
If you want some more advice around maximising your cashflow reach out to Whiteark; we have experience in cashflow improvement.
COVID19 has challenged many companies specifically in how to proactively manage cashflow to be able to stay viable; some tips to consider that might help your business maximise cashflow in this period:
Ask your customers to pay you as early as possible
Provide other payment options for customers (credit cards, afterpay etc) so you can get your money sooner
Negotiate payment terms with key suppliers
Review expenditure that can be stopped / delayed or deferred
Utilise credit cards to delay payments to be made; credit cards can be used for majority of transactions and even most suppliers take credit card as well
Need to take a closer look at your cashflow?
Let us help. To learn more about how to make cashflow king in your business, then contact us on whiteark@whiteark.com.au
