Business Basis: Cashflow Management

For small-to-medium businesses in particular, cashflow is one of the most important elements of business financial health. In fact, inadequate cashflow is one of the major causes of business failure.

So, what is cashflow? And how can you calculate, plan and manage it to your business’ financial advantage?

Cashflow measures the net amount of money going in and out of a business over a set period of time. It also shows the financial health of a business by helping you to understand your ‘liquid cash’ position and helps you predict how much cash you can expect to have available at any given point when used for forecasting.

Managing your cashflow is essential for planning ahead. You’ll be in a much stronger financial position if you understand how much cash you need, where it’s coming from and how long it takes to get it.

Here are some steps to help you with your cashflow management:

1.Understand Your Working Capital Requirements

Understand the amount of working capital your business needs to keep running. You’ll want to consider how much inventory you need to hold, what payments are due and when, and the length of time it takes to cycle from cash out to suppliers to cash in from customers.

2. Establish Your Working Capital Needs and a Buffer

Make sure your business has enough cash in the bank to meet your working capital needs. You’ll also want to ensure you have a buffer – either business savings, personal funds, overdraft or a revolving credit facility to fall back on in the event of a rainy day.

3. Plan Ahead

The unexpected will always happen, and it’s never a good thing to find out that you can’t survive when it does. Plan ahead by preparing cashflow forecasts for the upcoming year as well as a month-by-month basis.

4. Review Your Systems

Review your systems to ensure that you’re invoicing your customers regularly, and that you’re consistently updating how much is owed to you and how much you owe. Always review incoming invoices as well to ensure charges are accurate.

Your accounting invoicing software keeps track of outstanding payments and sends automatic reminders when invoices are overdue. Income is updated automatically when paid, so you always know where you stand.

5. Speed Up Your Cash Conversion Cycle

A cash conversion cycle measures the time span between disbursing and collecting cash. You can speed up this timeframe by asking for a deposit, putting customers on retainer or requesting monthly payment. You could also cut back your inventory levels or negotiate shorter delivery cycles or longer payment terms with your suppliers.

6. Make it Easy for Customers to Pay You

Always give your bank account details on your invoices, accept EFTPOS and credit cards, and set up a PayPal account. The easier you are to pay, the quicker you can receive funds and the better your cashflow position will be.

< Older Post Newer Post >

How to prepare for the end of the financial year

21 Mar, 2024

We’re nearly at the end of the financial year, so if you’re balance date/end of financial year is 31 March, there are a few things you need to do to help us prepare your financials. Take a stocktake If your business sells products/has stock, you’ll need to do a stocktake on 31 March. If you’re a business that sells products, then you need to take a stocktake of your physical inventory. If you’re a farmer, then you need to take a physical livestock tally. Send in your EOY papers Compile a folder (digital or hard copy) with a copy of the following documents: Bank statement that shows the balance on 31 March 2024 for all your bank accounts and loans. Insurance invoices. ACC invoices. Loan statements for the year (if applicable). Any new loans or refinancing documents. Invoices for assets purchased and sold. GST workings and reports. Submit the online questionnaire In late March/early April, you’ll receive an email from us with an online questionnaire to fill out and submit. If you haven’t received this by the end of April, let us know.

There’s a better way of handling those digital invoices (instead of printing them!)

18 Mar, 2024

Did you know that you can email your digital invoices or receipts straight into your MYOB In tray? You no longer need to print a digital invoice or receipt, you can simply forward them into your MYOB In tray and store them there. This saves on printing costs AND storage costs as it reduces the amount of paper you need to store for the next 7 years. The MYOB In tray lets you store documents such as bills and receipts in MYOB. Think of it like an electronic version of a physical in tray. To get your documents into your In Tray, you can simply email them as attachments. Your In tray has a unique email address that allows you to email documents straight to your In tray. It’s easy to find your In tray email address: click ‘In tray’; then click ‘More ways to upload’ and you’ll see Your In tray email address. You can send yourself documents that are PDF, JPG, JPEG, TIFF, TIF, or PNG files only.

How safe is your customers data?

14 Mar, 2024

Your business faces an increasingly complex regulatory landscape when it comes to data privacy, consumer protection, and industry-specific compliance requirements. Keeping on top of these compliance requirements is a complex task. Failing to meet your requirements can have serious implications, with non-compliance (whether intentional or accidental) resulting in legal repercussions and possible reputational damage for the company. Taking excellent care of your customer data We live in a digital world, where your business collects huge amounts of data from your customers. This includes contact details, financial information, credit card details, and detailed breakdowns of their spending habits and buying preferences. In an effort to protect this data and preserve customer privacy, there are various data regulations that you must comply with. A sample of these global data privacy laws include: The Privacy Act 2020 in New Zealand The Privacy Act 1988 in Australia The Data Protection Act 2018 in the UK General Data Protection Regulation (GDPR) in the EU If you trade mainly in New Zealand, it’s not too challenging to abide by The Privacy Act. However, if you’re trading overseas, you need to be aware of the data regulations you may need to comply with. Here are five simple steps to make compliance as simple and effective as possible: Work closely with legal advisers Compliance can get complicated if you’re not a legal expert. It’s sensible to seek advice from legal professionals, so you understand the specific compliance obligations for your industry and region. Run regular compliance audits It’s important to conduct regular risk assessments of your in-house data compliance. This helps your organisation comply with all the relevant regulations and industry standards, and stay updated with changes to compliance law. Protect your customer data Your customers expect you to take good care of their data, both personal and financial. Secure your customer and business data through end-to-end encryption and use of the best data privacy practices. Deliver regular training and keep your employees up to speed Your team needs to know the latest rules around compliance and what’s required of them. This means running frequent compliance training, so there’s a culture of compliance awareness. Use the latest data storage solutions With so much customer data being generated, it’s important to use up-to-date documentation management, and data storage software. This keeps the records and data you need safe, organised, and easy to access.

Business Basis: Cashflow Management

How to prepare for the end of the financial year

There’s a better way of handling those digital invoices (instead of printing them!)

How safe is your customers data?

To discuss all your account matters please call us on 09 438 1001