The COVID-19 pandemic has taken its toll on Australian businesses. And although we’re faring well compared to other countries, and our economy is on the rebound, we’re not completely out of the woods yet. Consumer confidence is shaken, and businesses of all shapes and sizes know they can’t take a single cent of revenue for granted. In order to bounce back stronger than ever, businesses need to be proactive in managing their finances.
It's arguable that nothing is more important than cash flow. Liquidity means agility. Having liquid assets (ready cash) available means you can make swift and decisive capital investments, maintain good relationships with vendors and ensure your team get paid accurately and on time. If you were feeling the pinch in Q4 of 2020, however, keeping your cash flow steady could be easier said than done. Here are 5 ways to boost your cash flow in 2021…
Get paid faster
Getting paid quickly is the key to maintaining a healthy cash flow. After all, you can only work with the money you have. The gap between sending your invoice and receiving payment can seriously stymie your cash flow if you have a number of clients that are historically slow to pay.
Typically, companies extend 30-day invoicing to their clients. But don’t be afraid to reduce this to 14 days. Nor should you shy away from taking advance payments on high-value jobs. It’s better to have 20–30% of the value in your account straight away than to wait a month for payment in full.
Don’t be afraid to up your prices
Cash flow will invariably be reduced to a trickle if your prices don’t reflect your worth. If your customers are a little shy to come out of the woodwork and start spending again in the wake of the pandemic, you may be tempted to lure them out with special offers and promotions. This can be effective, but make sure your limited time offers remain limited time.!
Don’t be afraid to maintain or even increase your prices. Constantly trying to undercut your competitors can make for anaemic turnover, which results in poor cash flow.
Invoice with clarity
Invoicing with clarity and precision is essential in keeping your cash flow flowing, if your debtors are unsure of the amount outstanding, or the terms of minimum repayment. This can result in poor cash flow as well as time wasted chasing up late payments.
Keep your messaging strong, and focus the debtor’s attention on the golden number that is the total amount owed.
Communicate with your creditors
Managing cash flow isn’t just about speeding up the flow of incoming revenue. It’s also about preventing your outgoings from spiralling out of control. If money is flowing out of your business faster than it’s coming in, you need to take active steps to slow things down.
The best way to do this is by maintaining communications with your vendors and other creditors. Ask if they’re willing to accept 45-day repayment terms instead of 40 days, or allow you to spread the cost of repayments. If you are unable to pay, but don’t communicate with them first, it could sour a relationship that you’ve spent years developing.
Make payment easy
Cash may be king. But you can expect much less of it to change hands in post-COVID Australia. But that doesn’t mean you have to compromise your liquidity. It just means you have to invest in making it easy and convenient for customers to pay you.
They should be able to make quick and secure digital payments. Some businesses even accept payment in cryptocurrencies like bitcoin. Needless to say, we know a thing or two about helping businesses to offer their clients a broad range of payment options.
We can help
If you’re interested in finding out more about cash flow, making and receiving payments, or any other aspect of your finances, then get in touch with our financial experts. Find out how GoCardless can help you with ad hoc payments or recurring payments.