Maximising Cashflow: Strategic Steps for Indigenous Businesses
Reducing the time that cash is 'locked-up' waiting for people to pay you is crucial for small business owners, and is a multifaceted task that demands a strategic approach. In the dynamic landscape of Indigenous business and social enterprise, understanding the distinction between profit and cashflow is crucial for sustainable growth. While profit is generated through invoicing, actual cashflow increases when payments are deposited into your bank account. This article sheds light on the significance of managing cash lockup and provides valuable insights into enhancing billing and collections processes.
1. Billing Strategies: Efficient billing is a cornerstone for improving cashflow. Consider the frequency that you invoice your clients. The sooner you invoice a customer, the faster you'll receive payment. For businesses with extended service durations, the option of progress billing is suggested as a means to consistently inject cash into the business.
2. Efficient collection of cash: Once the work is completed and the invoice is sent, the focus shifts to collecting the money. It is important that business owners establish clear Terms of Trade with customers before initiating any transactions. Shortening payment timeframes, such as a 7 or 14-day period, is recommended to as a quick way to reduce cash lockup time.
- Clear Expectations: The importance of setting clear expectations regarding payment timelines is stressed, ensuring that customers understand when their accounts are due for settlement.
- Payment Facilitation: Ensure your payment processes are user-friendly. Invoices and statements should feature easily accessible online payment options or provide explicit bank account details and due dates. Offering multiple payment methods, including direct debit, credit cards, Eftpos, and debtor finance where applicable, enhances customer convenience and expedites payments.
- Incentivising Prompt Payment: Businesses are encouraged to explore the benefits of offering small discounts for prompt payments, as this can foster positive relationships with customers while accelerating cash inflow.
Want to dive deeper? Talk to us about our Cashflow & Profit Improvement Meeting. We’ll show you what’s possible - in cold hard cash of course!
