Grappling With Post XMAS Cash Flow?

Speaking with many businesses over the years we find many seriously grapple with cash flow in the post XMAS period. Invoices not paid with accounts departments ‘away’, suppliers calling, wages over seemingly endless public holidays, customers & projects returning at different times leading to uncertain payments into the coffers, not to mention a Q3 BAS lurking on the horizon… 

Below are some practical tips to help manage through this troublesome time;

1 - Get on the phone & chase your debts. Seldom do people enjoy this, but the squeaky wheel truly does get the oil. If you have customers owing you money, jump on the phone (call, rather than email), & seek payment. Even if you receive a part payment now & the rest when they return. Being on holiday is no excuse now everyone has an internet connection. Let’s face it, that excuse of being ‘away' would never work with a bank, the ATO or payroll. Why should it apply to you?

2 - Invoice! If you have anything to invoice from before XMAS, or for any work over the XMAS period, make yourself a coffee, open up the laptop & get your house in order. Nobody can pay you if you have not sent the invoice. Extra tip - you could even offer a little discount on the value of the invoice, or waive a merchant fee, to incentivise fast payment, but be sure not to spite yourself in the process.

3 - Reconcile your financials, lodge your BAS & speak to the ATO now. Shock horror - the ATO can be helpful! If you are concerned about being able to pay your Q3 BAS, or your ATO debts, give the ATO a call & see about arranging a payment plan. Can you start paying when a major project is coming online..? Could you split payments over several months..? Have a think about what your cash outflows & inflows will be over the coming 30-120 days & see what fits. 

4 - Review Your Pricing. Often the best way to boost cash flow permanently is to review your pricing & make sure you’re not leaving value on the table. Are your rates in line with the market, is there a way you could pitch/ position yourself to yield a higher value? The beauty of changing pricing is that it can impact quickly, costs little to do, & like that extra serving of XMAS pudding, 100% hits your bottom line. 

5 - Review Your Terms. Under what structure are you paid? How often do you invoice & how quickly are you paid? Can you change either of these? Instead of invoicing monthly on 30-day terms, could you invoice weekly on 7-day terms..? It can be mind-blowing to see how this simple change, if nothing else, can impact cash flow. Sometime all you have to do is ask. Extra tip - this can be super powerful when combined with a price revision. For example charging $100 under ’normal’ terms, $95 for upfront payment, or $105 to split the payment over 3 monthly instalments…etc…

6 - Get Curious About Your Numbers - What is your margin vs. your mark-up? How big an overdraft should you have? How much cash do you create (or loose…) for every $ of revenue you make? What is the value of your business? How long would it take you to pay your debts back? What is your cash conversion cycle? What are the drivers of your profitability & cash flow, & most importantly, how would a simple change to do them impact your back pocket?

If you find yourself frustrated or concerned about your cash flow, unsure about what to do, or just plain curious & want to better understand how your business could make & retain cash, please feel free to drop David a email directly for a no obligation & free chat at david@rightbraininsights.com.