how to be a cashflow commando
DESCRIPTION
The GFC might be over, but the cashflow squeeze on Australian SMEs shows no signs of ending. There are plenty of late payers out there and with many small businesses in expansion mode, growth plans are putting extra pressure on cashflow. In this webinar, SME specialist Marc Peskett from accounting firm MPR and SmartCompany editor James Thomson will discuss:• How to keep your cashflow in check• Strategies to keep late payments low• The tools available to help you recover debts• The new cashflow challenges – growthTRANSCRIPT
James ThomsonSmartCompany.com.au
Marc PeskettMPR Group
How to be a cashflowcommando
James ThomsonEditorSmartCompany.com.au
Marc PeskettPartnerMPR Group
Poll question
In the last 12 months has your cashflow got better or worse?
Get the focus right
• Many businesses focus solely on
– revenue
– profits
– decision making based on P&L and Balance Sheet
• Cash flow:
• Keeps you in business
• Increases business value
• To manage you need to measure
Cashflow KING
•Knowing
– current cash position and your cash to cash cycle.
• Innovating to increase free cash flow
– shorten the length of the cash cycle, improve margins, reduce waste
•Nostradamus
– Seeing problems before they hit
– Understanding the future cash needs of the business
•Growth
– Growth needs cash
Cash to cash cycle
Production
& Inventory
Cycle
Sales &
Delivery
Cycle
Billing &
Payment Cycle
90
days
30
days
60
days
Cash
PaymentCash
Receipt
180
days
Measure so you can manage
• Liquidity
• Cashflow budget
• Rolling cashflow forecast
(weekly, monthly, quarterly)
• Actual vs Forecast
• Regular review of aged debtors and payables
Get on the front foot with customers
• Set payment terms to suit your business
• Communicate your terms up front
• Obtain trade references and conduct a credit check
• Don’t take on clients that can’t pay
• Use COD to test payment capacity
• Have an accurate and efficient billing system
• Offer convenient payment options
• Consistent with sales and customer relationship
policies
• Sack the client
Handling problems that arise
• Active management of debtors
• Early communication with creditors, ATO, your
bank
• Put payment plans in place
• Daily or weekly assessment of cash flow
management
• Share your problems with advisors, mentors,
friends
Dealing with problem debtors
• Chase late payers immediately
• Keep regular contact with debtors using
different forms of communication
• Escalate your demands
• Understand the customer before offering
special payment terms
• Withdraw credit or get payment upfront before
accepting further sales
• Use debt collection agencies
Funding growth – where the
problems arise
• Profit margins are too low
• Long Cash to Cash Cycle
– Investment in Working Capital > Growth in Sales
• Not enough cash left in the business to fund
growth
– Owners lifestyle costs
• Poor investment decisions
• Reactive in seeking funding help
– Seeking funding for prior year growth ?
Funding Options
• Self funding
• Bank lending
• Equity
• Grants
www.mprgroup.com.au
Thank you