Cash flow is King!
How’s your cash flow? Are you able to pay your debts when they fall due?
A common issue I’m seeing in Darwin small business is their inability to collect payment from customers. Crazy, I know!
I know that things are done a bit different in the NT, million dollar deals are done at the pub over beers and handshakes. There is a lot of good faith shared between small business owners in the NT.
Top 5 ways to improve your cash flow
- Investigate overdraft options - A good loan will help you to cover the holes in your budget and will ensure that you can purchase equipment, materials or stock to tide you over through peak season.
- Offer incentives for early payment - Offer lines of credit for reliable customers, or give them as large a discount as you can. If you do, they will be much more likely to pay early in the future.
- Plan for seasonal change - Many Top End business experience a change in trading behavior during the wet and dry seasons. Learn the lessons from prior years and be better prepared, establish a provision account where you can stash some savings during the good months to help you float through the wet.
- Invoice promptly - Many clients prefer to wait 30 to 60 days after receiving an invoice to make payments, which means that you’re already going to have to wait to get paid. It’s important that you send out invoices promptly to your clients, as that will shorten the period between making the sale and receiving the needed income
- Pay your bills when they are due - You may be tempted to pay bills immediately, as it will get them out of the way. However, you may end up needing the money that you’d spend to pay the bill, so it’s recommended to wait until you actually need to pay the bill to do so.