How To Improve Cashflow In Your Business
One of my favourite quotes comes from Robert Kiyosaki, author of Rich Dad, Poor Dad:
It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” – Robert Kiyosaki
Cashflow is one of my all-time favourite topics!
In my opinion, cash flow is one of the most important and fundamental components needed to run a successful long-term sustainable business. You should be making the most of your cash, by collecting payments quickly, monitoring expenses regularly, and using technological resources that make your cash flow management move convenient.
According to Fundsquire, 2022, 20% of small businesses in Australia fail in their first year and around 60% failure within the first 3 years. The main reasons behind this, is failure to prepare and poor cash flow management.
My Cash Flow Tips
Review your payment terms. Do you offer, 7-, 14- or 30-day payment terms? Do your clients take forever to pay you? Do you follow up regularly on aged receivables? Are you issuing monthly statements? Do you offer convenient online payment options?
Pay bills more frequently. I recommend weekly or fortnightly at an absolute minimum. Leaving bills to their due dates and paying them monthly will create large inconsistent dips in your bank account.
Employ staff? I highly recommend transferring your PAYG liability across to your second business savings/liability bank account, with each payroll cycle.
Super – I also recommend processing super via Xero super in line with your payroll cycle.
GST should be reviewed and transferred across to your business savings/liability bank account weekly.
Save for unexpected expenses, staff leave entitlements and income tax
Lastly, understand your budget, understanding the season cycles of your business and plan for those unexpected scenarios.
Cash flow is about getting into good money habits and setting your business up for success.
If you need help with understanding your cash flow and setting yourself for business success, lets chat!