4 Ways to Improve Small-Business Cash Flow

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A lot of small-businesses focus on profit, but cash flow is just as important. In fact, businesses can go broke because cash hasn’t come in fast enough, even through overall they’re making a profit. Small-business software provider Xero shares four tips on improving cash flow:

KNOW WHERE YOU STAND

You need to do a cash flow forecast to get a clear picture of your cash position in the coming weeks and months.

This can be complicated; you might want to get some help from your bookkeeper and accounting software to look at past financial data, which can be used to help you forecast.

CHANGE YOUR TERMS

Look closer at your payments to calculate average debtor-days – how long on average does it takes for customers to pay you? You should try to keep your average debtor days close to or below your payment terms, because the sooner the money comes in, the quicker you can start using it in your business.

If it’s taking too long to get paid, you might want to adjust your payment terms; for instance, by bringing them in to 14 days from 30 days.

OFFER DISCOUNTS FOR PROMPT PAYMENT

You can give customers an incentive to pay faster by giving them a small discount – say, five percent – for paying on time. Depending on your business, having the cash available sooner to buy stock or pay wages could be worth more than the small amount of foregone revenue.

QUICKLY FOLLOW UP OVERDUE ACCOUNTS

The longer you leave an overdue account the less likely it is you’ll get paid, so start chasing accounts the moment they become due. Send a polite email reminder, then follow up with a phone call. If you feel awkward ringing customers for money, get someone else to help. Some accounting software sends out automated invoice reminders and tracking collections, which saves time and boosts cash flow.

 

Specialising in Xero bookkeeping, Notch Above is a Brisbane bookkeeper and BAS Agent located in Alderley that offers Xero setup, as well as training and ongoing support. Notch Above can take care of all the bookkeeping tasks you would rather not do, like bank reconciliations, supplier payments, payroll services, debtor control and BAS returns.

Thanks for Xero for providing this article

 

3 Tips to work smarter, not harder

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The more efficient you can be in running your business, the more time you have for other important tasks. Small business accounting software provider, Xero, shares ways that you can work smarter, not harder.

  1. PLAN
    This should be the first thing you do at the start of the day. Start by writing down all the things you need to get done. Break the bigger and more complicated tasks into their component pieces so they’re more achievable and less intimidating. Now number the tasks in order of priority. (Try to get some of the unpleasant tasks out of the way first – it will make the rest of the day seem easier.)
    Keep the list somewhere visible so you can regularly check it throughout the day and cross off tasks.
  2. OUTSOURCE
    Virtual assistants are perfect to perform administrative tasks (like answering the phone, typing, research, presentations or social media) as needed, so you can only pay for what you use.
    Once you’ve found an assistant online that you like the look of, try them out with a couple of small jobs to see how they go.
  3. USE DOWNTIME
    As part of your daily planning process, make a list of small tasks that you can do at any time. These might be things like phoning back some clients, ordering stationery, finalizing a quote or paying a bill.
    Then when you’ve got a spare five minutes, whether it’s waiting for someone to ring you back or for a client to arrive, you can tackle one of these tasks and get it out of the way.

Specialising in Xero bookkeeping, Notch Above is a Brisbane bookkeeper and BAS Agent located in Alderley that offers Xero setup, as well as training and ongoing support. Notch Above can take care of all the bookkeeping tasks you would rather not do, like bank reconciliations, supplier payments, payroll services, debtor control and BAS returns.

Thanks for Xero for providing this article