Keep cash flow off the skids this Christmas
IF YOU'RE worried about your cash flow situation as the Christmas season gets off to a slow start, there are a number of ways to help keep things liquid.
Symon Brewis-Weston is the executive general manager of the Commonwealth Bank's Local Business Banking, and he has come up with a raft of suggestions to help ease financial pressure on small business.
He believes that managing your cash flow well should be your number one priority at this time.
“Even a profitable business can fail if cash flow isn't managed well,” he said.
“Keeping a smooth cycle of cash flowing through your business will help ensure there is enough money coming in to cover the outgoings, and hopefully some surplus for profits.
“When times are tight and input costs are rising, look at where you can speed up the cycle, either through chasing debtors, managing stock levels or reviewing your pricing,” Mr Brewis-Weston said.
He has come up with 10 top strategies to improve cash flow.
1. Keep track of cash. Create a cash flow tracker and update it daily with your business inputs and outputs. Download a tracker at: www.commbank.com.au/cashflow
2. Empty your stocking. Excess stock means less money coming in, so if you need to increase turnover, consider marking down prices. Ensure the discount price is still profitable, and remember that the money generated will need to cover the cost of new stock in the New Year.
3. Price for profit. Make sure your pricing strategy covers all business costs, reflects the market and is competitive.
4. Who's on the naughty list? Just because it's Christmas doesn't mean going easy on customers who owe money. Don't be shy in following up overdue bills and communicate with debtors. A simple reminder call may quickly resolve a forgotten payment and avoid a New Year cash flow shortfall.
5. Gather your helpers. Now is a good time to reassess staffing levels for the holiday season. Even in tough times many businesses will see upturn in sales over the holiday period so make sure you have accounted for extra salaries and have the time to train your new workers.
6. Encourage prompt payments. To get bills paid more quickly implement electronic banking facilities or request payment by credit card.
7. Keep cash in your pocket. There is no penalty for making payments on the last day they are due. Better to hold on to your cash than give someone else the interest.
8. Set the elves to work. By educating staff on the basics of how the cash flow cycle works, they will be better equipped to help you manage your financial circumstances.
9. Spend wisely for Christmas cheer. If you're a bit strapped for cash, don't just slash your entire marketing budget.
Instead focus on high profit margin products or services to get the best return. Don't spend money advertising low-profit products.
10. Talk to your banker. Keep in touch with your business banker and let them know how the business is performing.
There are tools and tips they can give you to help manage your cash flow before the situation deteriorates.
“When times are tight and input costs are rising, look at where you can speed up the cycle”