Business dies when it runs out of money. Therefore, it is important to be able to generate a constant cash flow.
In today’s realities, it is more and more difficult to do this. Turnover and marginality are falling. Suppliers do not give delays and demand advances. Banks refuse loans: they demand an impeccable credit history. Every businessman in Australia wants to know how to solve financing problems for a growing business?
Here are 9 helpful tips:
1. Separate personal and business money
Often, owners pull money out of business for personal needs, without thinking about the consequences. This greatly complicates control over business expenses, and liquidity problems arise.
Remember, you can take money from a business under two conditions:
-the results of the accounting show that the company is making a profit;
-there is money to pay dividends.
2. Engage in financial planning
In the midst of daily routine, the owner has no time to consciously look at the business from above. Many businessmen do not know how to plan a cash flow or simply do not do it. As a result, the business is drowning in a series of cash gaps, there is not enough funds for its promotion and development.
Proper cash flow planning will allow you to see when there will be an acute shortage of funds. And will give the owner time to solve the problem ahead of time. For example, apply for a loan from the bank and settle all the formalities.
Financial planning helps to set up uninterrupted work with suppliers, increases the resilience of the business to crises and its competitiveness.
3. Create a unified accounting base
Often, companies use 2-3 accounting bases at the same time, which are not linked to each other.
As a result, no one, including the owner, understands what is going on in the business. All types of accounting have their own lives. Accounting and tax accounting do not coincide with management. The financial result on paper does not reflect the real state of the business.
Without a solid financial picture, it is impossible to grow a successful business, keep this in mind.
4. Monitor the margin and sales turnover at the level of each product
Update the assortment in time. It is important to find a balance between fast turnover of hot products with a small mark-up and sales of high-margin products that allow you to receive a high premium.
5. Do not focus your business on one customer, and sales on one employee.
If one of the clients or managers brings 50% of the revenue, the loss of any of them will seriously undermine the business.
Key clients, realising their importance, often delay payments. Managers – dictate their terms or go to competitors and take customers with them.
6. Check your counterparties
Accounts receivable are a headache for any business. If the company works on a deferral basis or makes advance payments for deliveries, it is important for it to make sure that the counterparty is reliable.
Regularly check your counterparties: legal data, owners, history in special databases.
If the problem arises, make sure to contact specialists. Debt collection from Brisbane will help you out.
7. Carefully read contracts and every agreement
This will allow you to:
-Record key conditions to avoid disagreements in the process of fulfilling obligations.
-Track the impact of the terms of the deal on cash flow, if the primary agreements were adjusted along the way.
It is especially important to track changes in the terms of the deal for long-term, but profitable contracts.
8. Negotiate with banks in advance
It is not always possible to find a convenient financial partner on the first try.
It is important to prepare the ground for successful interaction in advance.
To get access to some banking services, you need to prove the financial stability of the business, and this takes time. For example, in order to connect an overdraft on favourable terms, it is important to show the bank that the business is operating in a profitable area.
9. Pay on time to suppliers and employees
A lot of delays arise from carelessness, sometimes from principle. As a result, the business receives low quality goods at an inflated price, the motivation of the staff falls. Make sure to pay all your suppliers and employees on time. People that are involved in business are its essential part. Unsatisfied employees equal the end of the business, don’t forget that.
A small business is bad if it does not dream of becoming large. After all, if there is no growth, then there is degradation. And what is the role of money? They are needed so that the team has enough funds to implement its plans.
Without proper financial planning, a developing business can suffocate and die 50 meters from the finish line. Because if there is no money, the most proactive but impatient employee runs off to a competitor along with a development plan.