Updated: Jul 14, 2020
If you’re a small business operating at reduced capacity, or thinking of reopening and not sure about the money, managing cash flow has never been more important.
Here's some great tips on getting paid faster, delaying your own bills and even raising your prices.
Read on for some ideas that may help you manage cash flow more effectively in difficult times.
Speed up your incomings
Do you have any big jobs where you can ask for a 20 percent deposit? If you already ask for 20 percent, you could ask for 30 percent. If there’s a way to get partial funds in the bank now, do it. Have a look around your business too. Is there any equipment lying around that you no longer use? Now might be the time to liquidate it.
Slow down your outgoings
If you have a 30-day account with a supplier, see if you can extend it to 45 days or even 60. Take advantage of local government relief as well as all the national funding available. If you’re going to be unable to pay your bills in full and on time, tell your suppliers and make arrangements; don’t just not pay without communicating.
You want to preserve relationships which may have taken years to develop. That might mean offering part of the bill when it’s due and the remainder in a few weeks or months. Consider what this means for future cash flow and financing options. The moment you stick your head in the sand rather than make a plan is when things start to escalate.
Make it easy for customers to pay
Do you have Pay Now set up on your invoices? This lets customers pay you on the spot with a credit or debit card. If customers have to find your account numbers, many tend to put your bill aside and forget about it.
A Xero analysis last year found customers using Stripe got paid as much as 12 days faster. You can also use Paypal - just having an 'always on' approach makes it much easier for customers to do business with you.
Review your prices
It might sound counterintuitive in tight times, but consider raising your prices. Your business costs go up every year – for example, employee award rates and electricity. If not, you’re making less money for the same work. .
Use real-time data
Xero and other cloud-based services provide near real-time access to banking, accounting and forecasting data to help you make informed decisions. This goes beautifully with the support of an expert, trustd accountant - shameless plug intended!
Xero recently unveiled three tools specifically aimed at cash flow, including short-term projections of your bank balance and a business snapshot showing key metrics. If you have time on your hands because of the downturn, this can be an opportunity to jump into business improvement mode. This may include reviewing your cloud-based business technology options.
If you’re looking for more help on managing cash flow, get in touch and we can help.
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