Here is a very informative blog from Xero with 9 cashflow tips. The link to this blog in Xero’s website:
How do you keep control of your cashflow and steer clear of those seasonal slumps? There are many tactics you can use in December and January to help with cashflow and manage the spikes.
“Many businesses shut down in this time which can lead to cashflow slump and, in turn, they delay paying their suppliers. It can become a vicious circle,” says James Solomons, Head of Accounting at Xero.
Here are his top tips for staying in charge of your cashflow.
1. Reduce payment terms and offer incentives
Research shows Australian small businesses are typically being paid 26 days late, so finding ways to encourage customers to pay on time around Christmas and New Year is particularly important.
James says it’s the season to ask for earlier payments. “If your terms are typically 14 days, take them down to 8; 30 days goes down to 14,” he suggests, adding that providing incentives in the form of discounts for early payments is another means of getting dollars rolling your way.
2. Invoice immediately
Waste no time in sending out invoices or chasing up slow payers, urges James. “And don’t wait until just before Christmas to send them the statement.”
Good accounting software lets you automate statements and friendly reminders. “It should be set and forget. Make sure you’re on busy customers’ radars a few days ahead of payment being due,” he says. And if they miss the payment date, James recommends a prompting phone call or SMS so it doesn’t skip their mind. “At this time of year, back-office tasks can go right to the back,” he says.
3. Make it easy for customers to pay you
“I’m surprised how many businesses still run on cash, including EFT [electronic funds transfer], and don’t offer other payment methods.”
4. Watch out for spikes in demand
Online businesses inevitably have less control over demand than others, which makes predicting required stock levels at Christmas tricker. The must-have is a good inventory solution so you don’t sell something that isn’t available. As your suppliers for lead time well in advance, James says.
5. Keep checking your web analytics
Beyond budget forecasting or looking back on last year’s trends, your website analytics deliver helpful clues for what’s happening now and what may happen next. Which pages are people visiting? At what point in the buying cycle are they dropping out?
6. Forecast and budget in detail
While some businesses scamper to keep up with demand, others may need to simply keep things ticking over. “You need a good handle on what’s going on for your business over the festive period. You may need to budget for a decrease in cash collections and an increase in outflows in the form of holiday pay, leave loadings or public holiday rates,” James points out. Do you need to close half the business for a couple of weeks or run it on a “skeleton staff”?
7. Have contingency cash
For businesses that foresee a cash shortfall, James also suggests invoice factoring, where unpaid accounts are sold on to a third party at a discount, and having an amount of working capital to draw on.
8. Put peace of mind high on your agenda
Something that’s often overlooked is the emotional side of business, James notes. “The happy business people at festive barbeques are always the ones who have their business finances in order. Smart budgeting and forecasting makes for a better frame of mind and, ultimately, a better business.”
9. Note down what you have learnt
James’ important final tip is to use the January down time to make a few notes about what went right (and not so right!). “This means months down the track when you’re planning the next festive season, you won’t just be looking at numbers,” he says.
The contents of this site are provided for informational purposes only. The information in this article does not constitute legal, financial, IT, business or investment advice of any kind and is not a substitute for any professional advice. You should always obtain independent, professional accounting, financial, IT and legal advice before making any business decision.