How to manage business cash flow

1. Review your pricing

Pricing can be a tricky one, because you want to remain competitive, while being fairly compensated for your product or service. It’s not just about how much it costs to deliver what you do, but also the value you bring to your customers. 

• Work out how much margin you need from sales to cover your expenses.
• Focus on the products, services or even customers that are the most profitable. If streamlining your offering will improve your cash flow, that could be an option.
• If you haven’t increased prices in a while, it may be worth considering. The customers who value what you do, should understand the need for a fair increase.

2. Get cash in faster

Get on top of your payments so you have more cash in the bank. Have a good system in place to manage your invoicing so customers are clear what is expected of them, and more likely to pay on time.

• Invest in a digital invoicing system that automates invoicing, so customers have them soon after receiving the product or service.
• Review your payment terms and consider reducing them if it could help with cash flow. If you can afford an early payment discount, that could encourage fast or even upfront payment.
• Allocate time in your week to chasing outstanding payments. It’s worth it.  

3. Increase sales

Sounds simple, but sales growth is crucial to business survival and growth. Can you expand your offering or improve selling methods?

• Look for other problems you could solve for your customers. Is there part of your offering they don’t know about?
• Launch a marketing, social media or sales campaign to drum up new business.
• Is it easy for people to do business with you? Consider improving your online store or offering new payment methods.

4. Review your expenses

When was the last time you went through what the business spends its money on? If there’s things that cost too much or you don’t need – that’s one way to make an instant saving.

• Cut any expenses that you don’t need.
• Arrange a payment plan for large expenses to lessen the burden on monthly cash flow. For your energy bills Bill Smoothing spreads your yearly energy costs into even payments, so you don’t have one large bill to pay.
• Look at your insurance policies, phone, internet and energy costs. If you can find cheaper deals elsewhere – make the switch. You can even bundle utilities at some providers for a discount.

5. Cost of assets

Physical assets are expensive, but worth it if they help your business generate income. But if you’re not using them, that money could be put to better use.

• Consider leasing or hiring an asset (like a vehicle, equipment or property) to spread out the cost.
• Look at finance terms, and see if you can get better deal from yours or another lender.
• Get a quick cash boost by selling assets you don’t need.

6. Forecast to better manage inventory

You don’t want unsold stock sitting on your shelves. Try forecasting so you can predict customer need and buy stock at a good price.

• Don’t buy more stock than you need, as this reduces available cash in the business.
• Clear stock that isn’t selling or close to its use by date.
• If your suppliers have a quick turnaround, see if you can wait to buy until your customer places an order.

7. Consider different employment options

With the right people on board, your business can grow – but paying wages has a big impact on cash flow. Before you bring on someone new, check their total cost of employment including pay, leave and entitlements.

• If you don’t need full time help, consider part time or casual roles. Adjust your roster to suit peak times.
• Consider outsourcing or hiring a consultant to help if you need a specialist skillset for a short period.
• Hiring costs the business money, so invest in upskilling and developing the staff you already have. You can even get a tax deduction for eligible staff training.

8. Get advice from a business adviser

If you need help, speaking to your accountant or a business adviser can help when it comes to better managing your cash flow. If you don’t have a clear idea about your cash flow, here’s a template for a cash flow canvas. This simple tool can help you explore any of the changes you’re considering, plan for the future and track your progress.