A little while back we went through the one report I believe every business owner needs right now, which is known as a 13-week cash flow forecast.
The insights from this report will help you be decisive and allow you to act, giving your business every chance of meeting these challenges head-on.
Are you confident you have enough cash in your business for the next few months? I would highly encourage you to read it here: https://businessaccountantsperth.com.au/what-business-owners-need-to-know-about-a-cashflow-forecast/
Once you have forecasted the future with different potential outcomes, there will be many ways to move forward from here.
It will depend on your business size, industry, your cash war chest, and, probably most of all, your ability to change your thinking and your actions from when times were generally good.
- Talk to the customers that owe you money
If you are owed money for some time and your cash collection system is not working, you need a different strategy. The longer it goes on, the less chance you have of receiving the money. People can react to adversities and challenges in different ways. Sadly, one way is turning off the phone and putting their head in the sand. You will need to reframe the conversation – so get on the front foot and reassure your customers you want to work WITH them at this time.
This could be an agreed payment plan that works for both of you, or a discount on the amount owing. Always have cash in the door mindset.
In these uncertain times, I could be forgiven for saying something is better than nothing. And it might just be enough to get you through the month.
2. Manage expenses
Start cutting unnecessary expenses – be ruthless. As an example – you are probably paying monthly subscriptions and you will begin to wonder why you got them in the first place, and what value it’s bringing to your business right now.
Also, I see time and time again, when business owners are in a growth mindset and things are going well, respectfully, they sometimes get lazy and lavish in their spending.
Let’s get lean again
3. Open up a dialogue with your key suppliers
Can you extend payment terms with your suppliers? Can you barter the price of your goods? Get on the phone. If you don’t ask, you will not receive.
4. Talk to the tax office
The ATO is being very supportive right now and there are many options to defer tax payments or set up low-interest payment plans.
5. Watch cash flow fundamentals
Your customers should be paying you faster than you are paying your suppliers – or else you may eventually run out of money. Your accountant should be able to give you some visibility around this.
Your new and improved cash flow scenario
You will be amazed at the positive changes to your cash flow scenario, once you start implementing some of these strategies.
And once we pass the storm, your business will be lean, resourceful, and positioned for great success as the economy rebounds.
The above are only some of the things you should be thinking about right now. Getting help from your accountant and other advisors is critical.
No one expects you to know how to build a 13-week rolling cash flow forecast or understand what it all means. This should not be your strength or the reason you went into business.
Please reach out to me for a highly confidential discussion. Let’s chat!