You can run a profitable business, but unless you have cashflow under control the odds are against you. Here are some simple accounting tips to get it right.
According to Dun and Bradstreet, 90 percent of small business failures are caused by poor cashflow management.
As the world is undergoing challenging times, it’s never been more crucial to be on top of cashflow and business performance.
The MYOB Business Monitor, which surveys local business owners, regularly finds cashflow listed as a chief concern or cause of stress for around a third of respondents.
Want to make sure you’re not just another statistic? Here are ten tips to set you on the course for improved cashflow.
1. Invest in a reputable online accounting package
With a reputable online accounting package, you’ll be on your way to better manage your cashflow from the outset.
You’ll have a handle on your accounting information and will can make more informed decisions around your finances.
MYOB online accounting will provide just that.
You’ll be able to automate your invoicing to your clients and set the payment terms that suit your business.
You can even see when your clients receive, open and pay their invoices. And, you can email regular statements as reminders as well.
As a result, you’ll spend less time on debtor management and get paid faster.
2. Debtor management in a mobile world
With your accounting software is in tow, you can better manage your debtors and cashflow with the use of mobile invoicing features in your accounting software.
There’s no reason why you can’t be creating an invoice on your phone or tablet before you’ve even left a client consultation or provided a service.
You can also process credit card or EFTPOS payments on the spot whilst your accounting software is automatically updated to save you time.
3. Creditor management
On the other side of the equation, businesses should manage the timing of payments of creditors too.
If you’re paying suppliers too quickly while clients drag out paying your invoices, then you will put your business under cashflow pressure.
That’s not to say you need to withhold timely payment of creditors, but rather keeping a closer eye on how you spend your business’s money.
With online accounting software, not only can you receive and pay bills, these days you can even capture and upload physical receipts via a mobile phone app — all of which allows you to get a much clearer idea of what you’re spending and what you owe.
4. Prepare a cashflow forecast
A cashflow forecast is a deeper dive into your business’s incoming and outgoing funds over a particular time frame.
It will help you plan for those looming bills and other planned expenditure and plan for the timing of the outflows so that don’t overspend when cash is tight, and you stay in business.
For example, a lot of businesses will go out and buy a company car when they’re flush with cash – without taking into account coming lean times.
Cashflow forecasts show the cash fluctuations caused by such actions.
Software like MYOB allow you to setup a cashflow forecast to help you better navigate performance.
5. Create a budget
Budgets are such an important part of running a successful business.
They’re the road map for your finances.
Budgets are an estimate of how your business will perform in the coming year.
It’s so easy to quickly lose control of your finances without a budget, and they set you on the path of achieving your goals by helping you make smarter decisions around your finances.
At times, you may need to adjust your budget as your business changes as an unexpected bill creeps in.
Budgets can be made easy with the use of your MYOB AccountRight and Essentials.
They’re very easy to set up, use and manage. They also allow you to compare past years and compare actuals too.
By monitoring your cashflow and reviewing your budgets regularly, you should be able to identify any issues early and making plans to avoid any tough times.
6. Review and update cashflow budgets
During challenging times, it is wise to keep your finger on the pulse so you can better manage any impact a crisis or slowdown may have on your business cashflow.
By reviewing and regularly updating your cashflow budgets or forecasts you are better placed to make changes before issues become major problems.
Therefore, using a cashflow tool to help you will make it so much easier to stay on top of your business.
7. Reduce overheads
Business owners should always look for ways to reduce their overheads, so they maintain a healthy financial position.
Savings can be made by reducing marketing and advertising budget, minimising spend on consumables and any other non-essential costs.
Reducing labour costs with minimal disruption to the business is also a good way to preserve cash. Consider reducing contract hours and distributing work to permanent staff (provided it is within the realm of your industry award).
8. Maintain stock levels
Cash is consumed if a business buys too much stock – so by keeping the right amount of stock on the shelves, cash is released to be used in other areas.
It’s better to buy frequently and less, to keep the cash in the business.
There are many additional apps that will help your business to maintain the optimal levels and avoid over ordering.
9. Seek other revenue streams
During times of revue decline it is important to evaluate how you can continue to trade by seeking alternative revenue streams. Pivoting your business can be crucial to your survival.
During the pandemic we saw many businesses pivot and create new revenue streams which helped them survive. By opting for online options and staying current will help you to drive more sales.
10. Go app crazy
Speaking of apps, there are a raft of apps available to complement accounting software such as MYOB.
These apps can automate the way you run your business so that you have more time to make sales.
Products such as EzyCollect (debtor management tool) and Calxa (cashflow and budgeting tool) you are armed with all that is required to keep you on top of it all and run your business more efficiently.