Cash flow is critical to your business and while increasing sales is usually the priority, chasing up debts and outstanding payments should be too.

As accountants in Rockhampton we often speak with business owners about the best methods of cash flow forecasting. In a nutshell, it’s about estimating your future sales and expenses.

Tips to improve cash flow

Paying customers: If you don’t invoice quickly and get your products to customers as a priority, you can easily run into cash flow problems. Try to convince your customers to pay early or set terms that are manageable. You could offer discounts for early payments and ensure you are following up on outstanding payments. Most small businesses have payment terms of 30 days from invoice. Others have 14 days or 45 days. It’s up to you to decide what you think is most manageable in terms of cash flow forecasting and what can be negotiated with customers.

Manage staff: Staffing levels around busier times can be a major problem for expenditure. If you hire more staff at Christmas time or other peak periods, keep in mind you’ll need to be ahead with cash flow management. For example, sales commissions could be delayed until payment has been received from your customer on large orders or you could offer a bonus scheme not paid until the following year.

Stock management: It’s usually best to form relationships with suppliers who will only provide you with products when you need them because having a backlog of supplies not selling can cause major headaches for your business. To help with cash flow forecasting you should be stocking your biggest sellers and replacing products that don’t turnover as quickly because they not only take up storage space but are taking the place of something that could be making you money.

Bills: As much as you want your bills paid as quickly as possible, when managing outgoing payments you can take full advantage of the terms set by the invoice. You may also be better off taking advantage of early payments should discounts be offered though so best to discuss with professionals like our accountants in Rockhampton.

Many businesses have goals of achieving a positive cash flow because it means they have more money coming in than going out. It requires management both across business plans but also timelines for payments. As accountants in Rockhampton, we see it all the time with Queensland businesses.

Expanding your business

Cash flow forecasting is critical to growing your business. It’s a tool to ensure you have enough positive cash within the business but also something you should review regularly in line with your business plan and goals. Cash flow forecasting can help you identify any market trends and aid in buying new assets. If you aren’t bringing in enough positive cash flow into your business, it could be time to get some advice from an expert like our accountants in Rockhampton. Read more about how an accountant can help a small business grow.

So, if you are a small business or company on the Capricorn Coast, get in touch with Meridian Accounting and Business services. You can reach us at Emu Park on (07) 4938 8262 and Rockhampton on (07) 4927 4625.