Cash flow is critical to business survival. PAUL DAVIES lists strategies to maximise your cash flow.
Manage the financial resources of your business
Ask for a larger deposit on all bookings. Retain funds as long as you can before paying suppliers. Get your customers on credit card or full payment upon booking. Pay your monthly creditors later than usual. Use your company credit card to extend your time to pay suppliers. Ask your suppliers for extended credit terms – payment over three months or longer. Change your GST to a payments basis and six months if possible. Put aside 20 per cent to 30 per cent of your receipts to pay GST and tax. Check your tax calculations and put off payment until you have funds or pay your tax with your GST. Put surplus funds in a high interest account or on deposit. Ask staff to work extra unpaid now and take time off later.
Get funding in place early for the low season
Manage your funding: Request a temporary overdraft well before you need it. Obtain a loan using the equity in your property. Obtain a loan using the equity in your Insurance policy. Obtain a line of credit for emergencies well before your may require the funds. Flexirent any computer purchases. Extend the credit limit on your credit cards.
What longer term structural changes can you make to improve cash flow?
Long- term solutions: Match your long- term assets with long- term debt so you have the cash to pay your bills. Ensure that you have good systems in place to capture and bill every booking. Bill your service as soon as it is delivered. Develop your web presence to get customers direct and improve your margins. Prepare accounting reports monthly to keep a close check on your business. Prepare a budget / cash flow so you know how much to put aside for the low season. If you are a tour operator – open a trust / travel bank account – to enable better management of funds. Only take out what is yours.