The Australian Tax Office has released some research that shows 65% of small business owners find managing their cashflow was their biggest concern. Here are 4 tips to help you sleep better at night.
Use a separate GST bank account
You know that 10% of all the income you receive needs to be paid to the ATO because you are collecting this GST on behalf of the government. So why not get 10% of every invoice you collect sent to a separate bank account called the GST account. This way every quarter when your book keeper does your BAS you will have this money ready to pay.
Have a system for following up your invoices
Following up your clients who are overdue with their invoices can be one of the most uncomfortable things a small business owner can do, especially if you are very close to your clients. There are invoice programs available now that send an automated email out reminding clients to pay. Then if clients don’t pay make sure you or one of your staff follow up on the same day each month. Clients will start expecting the call and it makes it clear you are not happy with the late payment.
Get your accountant to prepare a cashflow forecast
A simple one page excel spreadsheet will predict when money is likely to flow in and out of your bank account. It can be done for the 12 months ahead or even just for the next one to three-month period. It will stop you living the day to day cashflow tightrope and allow you to actively manage your business.
Use invoice finance
We all know that your cashflow problems would probably be solved if your clients paid your invoices when they were due. There is a type of finance available called Invoice Finance that will loan your business 80% of the value of your invoices that you have sent to your clients the day after you raise the invoice. Then the remaining 20% (less interest) will get paid to you when your clients pay.
The Proxy Finance Line of Credit facility is a type of Invoice Finance described above, if you would like to find out if your business qualify click here to answer a few short questions.