A Cash Flow Action Plan: 9 Tips For Overcoming Common Hurdles

Understanding cash flow problems is the key to managing them. Here is a checklist that can help your business deal with some of the most common issues faced by businesses.

TIP 1

Invoice on time, and consider deposits and discounts

Make sure you invoice as soon as possible. You could also consider asking customers for a deposit upfront, and rewarding them with a discount for early payment.

Make sure your invoice is set out clearly and is easy to understand so there isn’t any delay in payment simply because there were questions regarding the invoice.

TIP 2

Review your credit terms

Whilst you can’t always negotiate credit terms with larger customers, do so wherever you are able. The difference between being paid in 14 days or 60 days has a big impact on cash flow.

Prepare a cash flow forecast and calculate the impact shorter payment terms would have on your cash flow.

TIP 3

Proactively deal with potential late payers

If a customer is tardy with their payments, there’s no harm in sending a polite reminder that your invoice is due to be paid next week. Consider adding a penalty for late payments.

Having a good credit controller and keeping on top of your customers for payment is worth its weight in gold. Don’t be too generous with your payment terms, whilst operating within industry standards.

TIP 4

Offer customers more ways to pay

Make it easy for your customers to pay you. Ask yourself:

• How do your customers prefer to pay?
• Is cash-only payment going to harm your business?
• Will you have to follow up with customers for payment?
• What costs are involved in each payment method?

TIP 5

Maintain strong relationships with customers and suppliers

If you are struggling to make a supplier payment, let them know and negotiate extra time to pay. Similarly, encourage your own customers to do the same thing.

If you’re chasing an outstanding debt, always call first rather than email. Rather than speaking with the accounts department, get in touch with your contact at the customer’s organisation.

TIP 6

Stay on top of your tax position

When it comes to tax, ensure that you file your tax documents on time to avoid being hit with a failure to lodge on time penalty.

If you can’t pay your tax on time, ask the ATO about setting up a payment plan. You will still need to lodge your paperwork on time, but you could avoid the FLT penalty.

TIP 7

Regularly review your funding arrangements

When you simply don’t have cash reserves, there are plenty of funding options to choose from. Assess whether the funding arrangements you have in place are still suitable for your needs.

Think about arranging a line of credit with your bank before you fall short. Banks are far more helpful if you ask well before any cash flow problems arise.

TIP 8

Produce regular cash flows and create a budget

Cash flow forecasting and budgeting is essential. A monthly budget forecast should tell you when payments are due and what your likely final cash position will be.

For more information on debtor finance solutions, refer to Section 4 of this 4-part guide.

TIP 9

Consider working capital finance

Working capital finance is a line of credit linked to your outstanding accounts receivable. It enables you to turn your outstanding invoices into cash rather than waiting for payment on the due date or later.

For more information on invoice finance solutions, refer to Section 4 of this document.

In part 3 of this guide we will ask: How much working capital do you need?

Download our Cashflow Guide here

Feel free to contact us for anything that relates to your business finances so we can help with your success.

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