An important part of your business plan should be to improve the financial position of your business. Follow our steps to improve your financial position and cash flow. You don’t have to use all the steps, or follow them in any particular order. Choose the ones that best suit your business situation.
1. Get advice from a professional
If you haven’t already, talk to an accountant or business adviser about your finances. They may be able to help you find other ways to improve your cash flow. Or they may suggest options for getting funding internally.
2. Recover outstanding debt
Chase up as many outstanding payments as you can. If you don’t have the time, consider using a reputable debt collection agency.
Always have a condition of sale agreement before you make a sale. This gives the buyer your terms and conditions, including:
- how long they have to pay the debt
- any percentages you’ll apply to overdue payments
3. Reduce or rearrange expenses
Work out which of your expenses you could reduce or rearrange. You might be able to:
4. Sell assets
Selling unwanted assets can be a good way to get some cash and reduce your storage costs. Consider leasing your main assets. This helps to spread the cost over a longer period.
Consider registering a security interest on the Personal Property Securities Register (PPSR) if you’re:
- selling on terms, such as retention of title
- leasing out valuable goods
Registering a security interest can help you recover the debt if a buyer doesn’t pay or becomes insolvent.
5. Offer markdowns or increase prices
Apply markdowns to full-price products or services to:
- attract sales
- move surplus stock or discontinued products
Increasing your prices is an option if your business faces rising costs.
Whether you offer markdowns or increase prices, make sure you comply with pricing legislation.
6. Consolidate debt
Look at your current debts and see if you can combine them into a low interest, low fee product. When refinancing your current debt, make sure you shop around to see if you can you get a better deal elsewhere.
7. Use new marketing techniques
Putting more effort into marketing doesn’t necessarily require spending more money. For example, using the internet and social media can be a cheaper and smarter way of getting your message across.
8. Offer additional payment options
Offering additional payment options can open up different markets and improve your bottom line. Consider:
- payment systems like BPAY, BillPay or PayPal
9. Look for government grants
You may be eligible for a grant in some circumstances, such as for business:
- research and development
10. Invest your own money
Investing your own money or money from family or friends can be an easier way to get finance. Lenders generally want you to have some equity invested in your business (self-funding) before they’ll lend you money.
Before you use this option, carefully consider how this could affect your relationships.
11. Keep track of your cash flow
A cash flow statement lists all your incoming and outgoing cash items for the next 12 months. This will help you plan ahead and make sure you can cover your expenses.
12. Improve your cash flow
There are simple ways to improve your cash flow, such as:
- making sure you send a correct invoice at the time of purchase
- following up on outstanding customer payments as soon as you can
- reducing your expenses – consider finding cheaper suppliers, consolidating your debts for a better rate, and organising a periodic payment plan for larger expenses
To cope with changes in your cash flow, consider taking out a business loan. Before you do, it’s a good idea to assess your financial needs.
Source: Business Government
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The information provided in this article does not constitute specific advice. For further information, you should contact your professional adviser.