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At Bendigo Bank we know we have big responsibilities, which is why we’re here to help you with handy tips, interviews and advice on all things money and living.

How to manage cash flow

23 June 2020

What’s the number one issue keeping business owners up at night? Cash flow. Put simply, having money in the bank to cover your business expenses.

If you’re in business, here are some tips to help you sleep a little easier.

Details, details 

Running a business can be exciting. Big ideas fill your mind. Put those romantic thoughts aside, for now at least. You need to spend your time on the details of your business. Yes, details can be dull. But if you don’t know what’s happening, no one does. And the first details you should know are your expenses.

Know your expenses

Record every expense you know or anticipate. Record how much they’ll be and when they’ll be payable. And don’t just record the big-ticket items like stock, equipment and wages. Small expenses can accumulate quickly.

Now you know just how much it will cost you to stay in business (at a minimum). There’s another detail you need to get your head around.

Where’s the money coming from?

It’s surprising how many people rush into small business without knowing who their customers will be.

Don’t assume people want what you’re offering. Do your homework. It’s one thing to be niche, but if that niche doesn’t pay the bills then it might be time to reassess. 

Just like your expenses, understand who your paying customers are, how much you can expect them to pay, and when. But, remember some customers can be highly unpredictable when it comes to paying.

How to avoid the avoiders

Some customers will have their invoices paid before the invoice is even issued, while others may take a little while.

A headache for many business owners is spending time following up customers for payment. Depending on your industry, consider asking for a deposit before work begins, or a discount for early payment.

Mobile payment options can help you get paid on the spot, without the need to issue invoices with a payment period. 

Consider an overdraft

An overdraft lets you access more money than what you have in your bank account. It can help cover expenses, but also gets you by if customers don’t pay when you expect them to.

With an overdraft, you’ll be charged interest on the amount you borrow. And you only need to make repayments to keep your balance below your overdraft limit.

An overdraft might just be that safety net you need when juggling your cash flow.

Speak to a business banker

Small business owners wear many hats: sales, human resources, logistics, accounts.

You can’t be an expert in everything.

Find a business banker you can trust. A good business banker will get to know your business almost as well as you do.

Their advice on cash flow and growing your business can help you avoid many of the pitfalls new business owners stumble into.

There’s no shortage of small business challenges to keep your mind racing. But with some good planning and good advice, cash flow doesn’t have to be one of them.

NOTE: THIS ARTICLE CONTAINS GENERAL ADVICE ONLY. READERS SHOULD SEEK A TRUSTED PROFESSIONAL’S ADVICE ON FINANCIAL MATTERS.

 

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Bendigo and Adelaide Bank Limited, ABN 11 068 049 178 AFSL / Australian Credit Licence 237879. Any advice provided on this website is of a general nature only and does not take into account your personal needs, objectives and financial circumstances. You should consider whether it is appropriate for your situation. Please read the applicable Disclosure Documents before acquiring any product described on this website. Please also review our Financial Services Guide (FSG) before accessing information on this website. Information on this page can change without notice to you.

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