Managing a small business comes with many financial responsibilities. From overseeing staff wages, to logistical costs, to overheads and everyday expenses, you may find yourself increasingly busy. So how can you stay on top of your cash flow when you have many duties to juggle?
Anastasia Theodoropoulos, an independent advisor with Service NSW Business Connect, speaks to business owners across NSW every day and provides advice to help them manage their finances. Here are Anastasia’s top 4 tips to best manage your cash flow.
1. Find quick financial wins
Some ways to improve your cash flow are relatively quick to apply to your business, including invoicing promptly and effectively. Ensure you clearly communicate your terms to your customers and follow up as soon as an invoice is outstanding. Some businesses also offer an incentive to their customers for early payment.
You should also review your payment terms with your suppliers to see if they can be extended. Consider pulling back on non-essential expenses. If you hold stock, can you reduce the amount of inventory and still operate as effectively?
If you experience a temporary cash flow crunch, short-term financing options such as lines of credit or small business loans may help. These can provide the necessary funds to bridge the gap until your cash flow improves. It's essential to consult with a licensed financial advisor if you're considering these options.
2. Plan for the long term
Anastasia advises, 'without a business plan, you don’t know where your business is going. Your plan can simply be a few pages, which then provides direction for the business.'
It's important to develop a cash flow forecast and regularly monitor how your cash flow statement compares with your predictions. This way, you can identify any variances, spot potential issues early on and take action.
You should also regularly review your pricing to ensure it aligns with your costs and margins. Could your rent be too high? If so, are there options to renegotiate or even share your space with another business?
If you do not have an up-to-date business plan, developing one will be time well spent. It provides a way to measure your progress and identify what's working and what needs your attention.
3. Seek tailored business guidance
Business Connect advisors provide independent, tailored support across a range of business functions. They can guide business owners to learn a new system or understand the basics of bookkeeping, or help to identify market trends and how they might affect a business's cash flow. They can also connect you to relevant professional services, such as a registered accountant or licensed financial advisor.
By working with businesses that face a variety of challenges, Anastasia notes, 'I don’t make decisions for the business owner. I provide all the facts and information and support them to make their own informed business decisions.'
4. Recognise the opportunities
It's important that small businesses not only manage and mitigate the various challenges to their cash flow, but also recognise opportunities to grow their cash flow in a changing economic climate.
'Many NSW businesses have been able to pivot their offering, access government support, improve their digital readiness and adapt to changing consumer preferences. This has seen their cash flow improve, and it's important to remain open to these opportunities,' added Anastasia.
The impact on cash flow varies across industries and individual businesses, so it's important to seek specific advice if you're concerned or believe your business could improve in this area. The earlier you seek help, the better.
Find a Business Connect advisor for advice tailored to your unique business needs. You can also attend a webinar, online workshop or event to grow your professional network and access online resources for practical tips and industry guidance.