Cashflow Reporting – 10 Tips to manage your small business cashflow

optimiseonline | June 16, 2016 |  News

These past few months seem to have been all about cashflow here at WiseClick. I have prepared more 12 month cashflow projection reports this month than ever before, a sure sign of the times and the struggle to keep on top of things in 2016/2017! This brings me to thinking about small business and managing cashflows.

I wanted to explain, to those that are interested, some simple ways to quell the cashflow stresses. Below are the main points that we discuss with our WiseClick Bookkeeping and Consulting clients when they are having trouble keeping up with their BAS payments.

10 Tips on how to improve and effectively manage your cashflow

Note!: After writing this I realise that some of the tips sound a bit complicated for those that don’t love numbers like us! Please don’t hesitate to contact us if you are keen to try any of these and need some help.

1. Be right onto your Debtors. Have a firm debt collection policy, check your reports every week and call overdue invoices on a regular basis. Train ALL new clients that you are not the one to mess with. Have a debt collection agent that you can pass the naughty customers over to as soon as you don’t get any results. Don’t procrastinate on this one, the older they are the more likely that you will end up writing off an invoice.

2. Did you know that Xero has an inbuilt email reminder system to tell your customers when their invoices are overdue? You can set your software to do the first few email chase ups for you! There are also add-on softwares that are more customisable and can do the debt collecting for you. (Such as – Chaser & Debtor Daddy)

3. Ensure you offer many ways to pay so that your customers have no excuse to pay late. You can add payment services to the bottom of your invoices so that customers can click through and pay via credit card and pay pal. Direct debit is also becoming much more common when collecting monies. You can use providers such as Eway or EziDebit for this.

4. Get paid before you leave if you deal with different people every day. Now most accounting packages have payment services that you can activate to accept credit card payments via your mobile phone. This will defiantly improve your cashflow plus save you time chasing funds later or processing payments later in the office.

5. There is nothing wrong with asking for 50% deposit up front if you are providing a physical object or organising a special order for a customer. A ‘goodwill’ deposit is also common for a large service based contract.

6. Of course the suggested business norm is to get your Customers to pay early or upfront and then drag your suppliers out for as many days as you can. When your cash is low try to stretch your suppliers out to 90 days if possible. Most suppliers will be okay with late payment as long as you tell them how much and when you will pay. If you setup a payment plan and stick to small, regular payments then generally suppliers will weather the storm with you.

7. Take the stress out of super and BAS payments by setting up an interest bearing savings account and making weekly payments into it.
a. Transfer the super and PAYG amounts from your payroll report to the savings account after each pay run or during the pay transfer. (You can setup the savings account as a supplier and include in your ABA file).
b. Work out the average weekly GST amount from your last few BAS (Label 1A less 1B). Then transfer this weekly to the savings account
c. Consider putting some regular funds aside if you are a Pty Ltd to cover your company tax if you are making profits.
d. Don’t touch the savings account during the quarter!! When your BAS and Super are due you should have the amounts needed to pay STRESS FREE.

8. If you are short on cash then most likely you are not making the profits that you were last year. If you are a company and you report PAYG Instalments on your BAS, these are estimated from your last tax return and this year’s turnover. Talk to your bookkeeper and accountant about varying these down each quarter, while the business is not doing so well. Call “hardship” on your BAS payment plan. Sometimes you can get the interest on your ATO account reversed through your BAS Agent or Tax Agent.

9. If you have both overdue BAS and overdue superannuation. The best advice is always to pay the superannuation FIRST! Did you know that if your super is paid more than 7 days late then it is deemed non – tax deductible? Non tax deductible means that you will still be required to pay the super ASAP but you will most likely pay up to 30% tax on the amount as it is not deemed to reduce your tax. Late superannuation payments will also incur late charges, admin charges and interest on late payments. The overview from this is that your superannuation payment amount becomes approximately DOUBLE! This is why we always advise for the owner to pay the super before the BAS if you are short on funds, make a payment plan to pay the BAS off later.

10. How to predict the future – use a 12 month Cashflow Forecast Report. It is easier to manage your cashflow before it gets into dire straights. Be proactive and ask your bookkeeper to do a 12 month forward projection cashflow. This will let you know when to expect cash shortages before they happen. We can prepare one for you in two hours that can then be updated by yourself or your staff once a month.

I have to stop there otherwise this will become a book!!

In closing, please do review your business procedures if you are cash poor, possibly you may not have considered some of the tips above and they will help. Don’t procrastinate, if you think you might be starting to have a cashflow problem then action it NOW and get some help. A cash shortage is much easier to manage from further out. Get on top of it before you are left with no cash buffer in the bank to move around and bargain with.
Look at getting a cashflow projection to see if you will be safe for the future. Then if you see a problem you will have time to make some strategic plans ahead of time and not just react with uninformed decisions when it’s too late.

Until next month,
Cheryl

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