If late payments and invoicing issues are causing cash flow problems and holding your business back, here’s where to begin to take back control.
RECIPE FOR SUCCESS INGREDIENT CARD
Ingredient
Cook the Books
Question:
How to solve your cash flow problems?
Answer:
If late payments and invoicing issues are causing cash flow problems and holding your business back, here’s where to begin to take back control.
When you run your own business, hard work comes with the territory. But despite how hard you work, unpaid and late invoice payments can have a serious impact on your cash flow and business performance.
Chasing invoices
When it comes to on-time payments, thankfully the days of waiting for cheques to arrive in the post and be processed by the bank are long gone. eInvoicing systems have taken the guesswork out of payments, providing multiple payment options for your customers and automating payment reminders so you can focus on your business, rather than keeping track of outstanding invoices.
Research shows that on-time payments of invoices have improved over the past few years, with 32 per cent of small to medium businesses saying more invoices are being paid when they’re due.
However, while they’ve improved for some, on-time payments are still a recurring problem for many, especially smaller businesses.
Only six per cent of businesses with two to four employees and ten per cent of businesses with five to nine staff had seen an improvement in their on-time invoice payments, compared to 51 per cent of businesses with 50+ employees.
Chasing invoices for payment has always been one of the toughest challenges for small businesses. And for micro-businesses, it can be a major pain. Awkward follow-ups and phone calls, and promises of payments that don’t eventuate.
Unreliable payments can also have a knock-on effect – meaning small businesses awaiting payments are then late in paying their own suppliers, causing businesses to stall. Most small business owners can relate to the feeling of being profitable ‘on paper’, while their actual bank account sits empty, awaiting outstanding invoice payments.
Lack of cash flow
Lack of cash flow can be the difference between building a thriving business – one where you can develop new products and services, enter new markets and maximise opportunities – and merely surviving.
We all know nothing in business is 100 per cent certain, and new challenges arise all the time. For example, earlier this year it was fuel prices, not the pandemic, causing businesses the most stress and uncertainty.
Gaining control of your cash flow means you’re in the business driver’s seat. Imagine what you could create, with the confidence of reliable cash flow in your business.
Cash flow Tips:
•Set out clear payment terms with new customers, so they understand their payment responsibilities.
•Automate payment processes and provide customers with multiple payment options – it’s about making payment as easy as possible.
•Maintain a cash reserve, but don’t be afraid to invest the cash back into new opportunities for your business to fuel long-term growth.
•Change your cash flow mindset. Now the pandemic situation has evolved, continuing to be overly cautious around spending could be a handbrake on your business. (Source: Koshies Business Blocks: Andrew Baines, GM Financial Services, MYOB).
Method
You are in business to make a profit and keeping correct financial records will enable you to measure, control, evaluate and forecast your profitability, your financial needs and your financial viability.
