In today’s fast-paced business environment, maintaining a healthy cashflow can be a challenge for many businesses. However, ensuring a consistent and positive cashflow is crucial for the success and survival of any business. It’s the lifeblood that keeps the business running, allowing you to pay employees, purchase essential resources, invest in growth, and maintain a safety cushion for future uncertainties. In this blog post, we’ll explore strategies to enhance your business cashflow, systemise your accounts, and make informed decisions with confidence. Let’s dive in!
Systemising Your Accounts
The first step to improving cashflow is to systemise your accounts payable and receivable. This means establishing a systematic approach to collect what’s owed to you within your payment terms. It also involves looking at how you can optimally use the terms you have with your suppliers to keep cash in your business for a longer duration. This systematic approach reduces the chances of late payments, defaults, and cashflow shortages.
Forecasting Your Business Cashflow
Forecasting is a vital tool for managing cashflow. Without a proper forecast, you may be running your business in the dark, uncertain of where you are heading financially. If you’re unsure where to start with forecasting, don’t hesitate to seek assistance from your accountant. They can provide a realistic projection of your cashflow based on your business’s historical data, current trends, and future predictions. Having a forecast enables you to see where your business is heading, helps you set realistic goals, and provides a benchmark to measure your progress.
Scenario Planning For Cashflow Management
Scenario planning is another effective strategy to improve your business’s cashflow. It involves exploring how minor changes in your current operations can significantly impact your bottom line. By visualising the impact of certain changes, you can make decisions with confidence and plan for a variety of business scenarios.
For example, you may want to see how altering payment terms or investing in new equipment to enhance efficiency will affect your future cashflow. Scenario planning allows you to create and visualise these changes before implementing them. It gives you an idea of the potential risks and rewards, enabling you to make informed decisions that can positively impact your cashflow.
Optimise What You’re Already Doing
Often, increasing cashflow can be as simple as optimising what you’re already doing. This can include checking your pricing. Review your current pricing and see what you can change. Have you benchmarked yourself against competitors? Do you understand your profit per product or service and are you focused on growing your most profitable offering?
Another area to scrutinise is your overheads. Making some minor adjustments to outgoings can make a difference over time. Can you pay some items in instalments rather than annually? Can you invoice customers more regularly? All these tweaks can have a profound impact on your cashflow.
Lastly, do you have a buffer? Do you know how much cash your business needs each month and do you know how long your current bank balance will last? Having a buffer can protect your business from unexpected shocks and ensure that you have sufficient cash to cover your expenses.
All of the above can be explored through Scenario Planning, helping you to make the best call for every decision.
Plan B (Or C, D, E) For Your Business
Think of scenario planning as having a Plan B (or C, D, E) for your business. It helps you use your time strategically on projects that deliver significant benefits to your bottom line and cashflow. Having alternative plans in place ensures that your business can weather uncertainties and maintain a healthy cashflow, regardless of the circumstances.
Remember, improving your business’s cashflow isn’t an overnight task. It requires careful planning, strategic decision-making, and constant monitoring. But with the right tools and with the strategies we’ve discussed, you can start taking control of your business cashflow today and set your business up for future success.
In addition to assisting clients with all of their Accounting needs, here at Lemonade Beach we also work with business owners to provide Strategic Business Advice. For example, this may include identifying key income-producing projects, business planning, product development, business structures, scenario planning and of course, cashflow forecasting.
If you’d like to start managing your cashflow more effectively, we encourage you to book a complimentary consultation to learn why our Cashflow Forecasting Program, “Swell” might be the perfect tool for you.
You may also want to check out our blog article – Why Your Small Business Should Use Swell – which unpacks the eight key benefits of our Swell Program.