It’s no secret that inadequate cash flow is one of the main reasons why businesses fail in Australia.

New research commissioned has found that the biggest struggles for small businesses across Australia are:

• ‘cashflow’ (35%)
• ‘marketing effectiveness’ (30%)
• ‘lack of support’ (19%)
• ‘hiring the right people’ (18%)

This sees cashflow as the biggest reported problem for business owners trying to survive.

If you’re reading this as a business owner, you probably know what it’s like to balance many different job roles. Many business leaders are juggling the demands of being CEO, Head of Marketing, Manager of Sales, Chief Accountant and many more positions… all at the same time!

While this can be exciting and fast paced, not to mention probably necessary in the early days, it means that no two days for a business owner are alike, making it increasingly difficult to forecast and consider future risks ahead.

Credit management is an area easily overlooked due to its complex nature. However, if you’re already time and money poor, it’s very easy for late payments to really hurt a business and compromise cashflow. It is essential to have strong credit management in place to perform risk assessments and avoid this.

Here are three of the key business finance factors you need to be on top of so you can plan and execute business operations seamlessly:

1. Cashflow – Cashflow is different from making a profit.

Businesses can survive for a while without profit but not without funds available to keep business operations continuing.

The secret to a healthy cashflow is to accurately monitor expenses and receipts to maintain a flow of funds to finance ongoing work.

The difficulty is investing in new work before you’ve been paid for previous jobs.

It’s not an easy process to manage. The latest SME Growth Index found 79 per cent of small businesses say cashflow issues cause them sleepless nights.     

2. Credit checks – Before taking on new customers run credit checks to see if they’re reliable payers and from this information decide what payment terms and credit limit to offer them.

It’s sensible to offer short payment terms and low credit initially and gradually extend it once they’ve proved themselves reliable.

Run regular reports to check outstanding amounts on purchase and sales ledgers and chase late payments regularly.

3. Tax – Managing your business tax affairs is an important legal requirement of running a business.

Your accounting team or tax agent must ensure they follow all tax procedures and meet all tax deadlines.

The most important date is the end of February when most businesses have to file their tax return and make payments.

Don’t forget to use your $30,000 instant asset write off if your turnover is below $50 million.

Now your team can make better informed decisions for your business. You’ll be able to plan operations, new projects and growth knowing you can rely on the data to make these decisions.

Morris Finance can help your business manage its cashflow. Call us today on (03) 5223 3453.