Top tips for keeping cash on track

Ask any business owner what challenges they’ve faced and you can bet cash flow management is up to the task.

In May of last year, a study by Wakefield Research surveyed 500 Australian businesses and found that 63% had experienced cash flow problems more than once in the previous 12 months.

As the pandemic has shown, you may not be able to predict or anticipate the risks to your business results, but being aware of the risks to cash flow and knowing how to manage them can help you get back on track. right track quickly and efficiently.

Here we look at the types of risks your business may face and offer advice on how to prepare for and manage them.

Treasury risks

Startup: The only certainty in business is change, and this is even more relevant for newly established businesses. Product launches may be more expensive than expected, cash flow may take longer than you want, or your market may be more specialized than expected. Cash flow during this initial setup phase is crucial, and a stable income stream will ensure you have the ability to pivot if you need it.

Seasonal cycles and low sales: No matter how much your stock, your products or

services, most businesses will experience a drop in sales at some point. Your the activity is seasonal and subject to sales cyclesor simply that the need for your particular goods or services is slowing down.

Professional debt: You may find that you overcapitalized when starting your business or expanding a product or service line. This may result in trade debt, but it’s not the end of the world. Many businesses, especially seasonal ones, can operate with negative cash flow until sales balance out, and expenses are then absorbed by positive cash flow.

Receive 120,000 bonus Qantas Points with the American Express Qantas Business Rewards Card when you apply before November 2, 2022 and spend $3,000 on your new card within 2 months of the approval date. Available only to new American Express Cardmembers. Learn more or apply here.

Ways to manage cash

Although cash flow can be difficult to predict, especially in the early stages of starting a business, conducting thorough profit and loss audits at each stage can help you prepare for the future. Be sure to pay attention to the lows as well as the highs and keep detailed records of your spending. You can also use tools such as a cash flow predictor to get an accurate picture of your finances.

Here are some ways to manage or supplement your cash flow when times are tough.

Reserve funds and credit: Some businesses may not be able to have reserve funds, but an emergency cash reserve can be invaluable if cash begins to dry up. Business credit cards and short-term loans can also be part of a support plan, and some business cards, such as the American Express Platinum Business Card, don’t have a preset spending limit. The American Express Platinum Corporate Card has the added benefit of up to 55 days to pay for purchases, lets you earn points and redeem them for purchases or redeem them for gift cards.

Reduce employee travel costs: Cards such as The American Express Business Explorer credit card It’s a great solution for large businesses looking for ways to cut expenses as there’s no charge for up to 99 employee cards, up to 55 days interest-free, and for businesses that need employee travel, you can redeem earned points for flights, accommodation or car rental. The American Express Qantas Business Rewards Card allows companies to earn Qantas Points for purchases which can then be used to help offset travel costs. This card also offers up to 51 days to pay for purchases, which is helpful in limiting the strain on cash flow so you can focus on your business growth opportunities.

Follow your days outstanding (DSO): The longer your customers take to pay your bill, the longer you wait for money and the slower the cash flow. Reduce bill payment delays or offer early bill payment incentives to generate this cash flow. As a customer of a vendor, you can make this work for you – ask for your billing terms to be extended, so cash stays with your business longer. Some business cards, such as American Express Business Explorer credit cardcan also help you give up 55 days without interest to pay for your purchaseswhich helps you get a return on your capital and gives you a little more leeway.

Compensate for seasonal slowdowns: If your the activity is seasonal or experiences slack periods, keep detailed records of when this downturn occurs and use this information to better prepare for any impending cash flow reductions in the future. This may mean limiting stock purchases before downturns, rotating advertising targets to try to reach new customers, or using downtime to improve skills. You can also offer off-peak discounts to boost sales and support cash flow, or set up packages to keep inventory turning.

Overall, while it can be a bit daunting to find the right balance for your business, there are plenty of ways to prepare for business downturns, control cash flow, and ensure your company remains in the dark.

Read now: Four Easy Steps to Cash Flow Forecasting

Comments are closed.