Business owners are all too familiar with how much of a struggle cash flow can be. One month your bank balance is sitting at a healthy balance…then a run of expenses sees it dip to the point where you’re not sure this month’s pay run will be covered.
With a long list of expenses including your rent or lease, wages, equipment costs and stock, taking control of your cashflow can seem like a daunting task.
Most small businesses struggle with cash flow, but this doesn’t have to be the case. Here, we share three tips to help you manage your cash flow more effectively and improve the productivity and success of your business.
Where to start
Your first step is to take a look at your cash flow projection, which you can prepare using advice from the Australian Taxation Office website. This information will enable you to get a clear picture of exactly where you stand, so you can predict shortfalls, plan for major expenses and provide important details to prospective lenders.
Next, it’s time to look at ways to manage your cash flow better.
There are many strategies you can implement to better manage your cash flow, and one of the most obvious is to reduce your outgoings. Small Business WA advises that keeping outgoing payments to a minimum is essential for effective cash flow management, so some examples of how to cut your costs include: reducing utility use; reviewing your insurances, phone and internet services; negotiating with your landlord or suppliers for reductions.
If your situation requires some more serious action, these three tips could help:
Tip 1: Loan consolidation
If you are able to consolidate your business loans, you could reduce and simplify your monthly repayments. If you have several loans and credit cards associated with the business, consolidating these into one low-interest product could save you thousands, freeing up that valuable cash to use elsewhere in the business.
Tip 2: Equipment finance
Another area where you can release some cash is with your equipment and motor vehicles. If your business requires expensive equipment to operate, you may find you are better leasing it, or buying it on finance instead of paying cash upfront. Of course, you’ll want to discuss the tax implications of this with your accountant.
Ensure you understand the terms of the loan, including the interest payable, any fees or charges, and whether there are any penalties should you choose to pay the loan out earlier than agreed.
While it’s always important to have your business equipment and vehicles adequately insured, it’s even more so when those items are under finance, so you are covered in the event of theft or an accident. You don’t want to be repaying a loan for equipment you can no longer use.
Tip 3: Capital raising
Another way to improve your cash flow is to raise capital, which can help to provide taxation benefits as well as generate cash flow for the business. Raising capital through your business assets could help solve both short and long term cash flow issues, depending on how you structure it.
Morris Finance are able to raise funds from a number of commercial goods and unlike major institutions, we don’t discriminate between goods, industries or profiles.
The team at Morris Finance can assist you with all types of business finance, and our dedicated finance brokers and new business specialists can facilitate financial solutions that allow you to grow your business.
Give us a call today on (03) 5223 3453 to see how we can help you improve your cash flow.