Managing my cash flow

As a small business owner, you are entirely responsible for managing your cash flow.

Your cash flow is the driving force behind your business so it is important that you manage it effectively in order to stay profitable.

The fact is, every business has peak times and quiet periods throughout the year, which will result in a surge or a reduction in revenue. You will need to manage your cash flow so that you can sustain the seasonal changes as well as any other changes in your business.

Thankfully, there are a few things that all small business owners can do to manage their cash flow, namely:

1. Plan and monitor cash flow

It is important that you plan and monitor your cash flow when running your business. A useful way to do that is to create a cash flow forecast and you may want to do this with the assistance of an accountant. A cash flow forecast typically covers the next 12 months and is broken down by months. It should include the amount of money coming in and out of your business. Some of your expenses and earnings may have to be estimated, while others (like the cost of rent or internet) will be fixed. Your cash flow forecast should include any issues that may affect your expenses or revenue, such as quiet periods for the business or certain big expenses. Every month, you should track your cash flow, compare it with your forecast, and make adjustments to your forecasted budget as and when required.

2. Improve efficiency

When you’re running your business, you should look for ways to improve efficiency. Make it as easy as possible for customers to pay you, such as offering EFTPOS, and you can encourage them to pay earlier by providing incentives. You should always send a correctly formatted invoice with a clear deadline, and outstanding payments should be followed up as soon as you can. Be direct and fair with suppliers, but don’t be too lenient. It is also helpful to invest in a reliable accounting system or to hire an accountant to ensure your accounting information is up to date and this will make it easy for you to track how you are performing.

3. Consider a cash flow loan

If you need a boost to your cash flow, it is worth considering an unsecured loan. This particular loan can assist you in covering any outstanding costs such as paying invoices, suppliers or wages, when cash flow is tight. The advantages of these loans are that they do not need a security asset, such as property, and they can be approved in a short period of time. At Mortgage Choice, our brokers can find you an unsecured loan with a competitive rate and flexible repayment options from one of our lender partners.