Listed in: Finance & tax
Five ways to improve your cash flow
Balancing incoming cash and outgoing expenses can be tricky. Here are 5 simple things you can start doing today to help you manage your business cash flow.
3 minute read
In business, turnover is vanity, gross margin is sanity, and cash flow is reality. Whether you are importing and distributing, manufacturing, or in the services sector, cash flow is the life blood of your existence. However, keeping the money moving to line up income with outgoings is the tricky bit.
If you’re thinking of or have recently started a small business, you may be wondering how to keep your cash flow coming in. Here are five practical tips to help you manage your cash flow.
1. Invoice quickly
One very effective thing you can do to avoid cash flow problems is to speed up the time it takes to get your invoices out. Instead of waiting until the end of the month, send them out straight away with the goods when they are delivered or when the work has been done. Your customers still get the 7, 14, 30 or 60 days to pay (or whatever your trading terms specify), but you save yourself a week or more right from the start.
2. Make it easy for customers to pay you
Make use of mobile payments, that way you can get paid on the spot the moment the job is done. There are plenty of ways of doing this, just ask your bank. At BNZ, our mobile payment app called BNZ Pay, can turn your android smartphone into a payment acceptance terminal, which means that provided you know what the charge is going to be, you can accept payments on the spot – which also means no more chasing invoices when you get home as the customer pays straight away. If mobile payment isn’t a requirement for your business, simplifying payments for customers should still be a top priority, so consider making online payments possible, or even just making sure you have a modern point of sale system.
3. Use technology to manage cash flow
Managing cash flow through your business is one thing, dealing with all the accounting and tax workload that goes with it is another. Consider a cloud-based accounting system to make managing your GST easy. The good ones come with plug-ins like job costing and quoting, payroll, and inventory management which remove the burden of system administration and automate many processes for you. You’ll find you can eliminate many costs associated with paper, printing, and postage by going electronic, as the IRD accepts many submissions electronically now too. At BNZ, we’re also using technology to create a more seamless, and simpler cash flow experience for businesses. Our cloud-based system, CashFlow Plus, plugs straight into existing accounting systems allowing customers access to funding of up to 80% of the value of their unpaid invoices in under 10 minutes, which means quicker access to working capital.
4. Speak to your bank regularly
Staying in touch with your bank and building a relationship with them means they’ll be more informed when it comes to dealing with the unexpected and managing the pressures that growth places on cash flow. The more the bank knows about how your business is going, the better they’ll be able to help.
5. Predict the future
OK, so maybe not predicting the future, but the next best thing — cash flow forecasting. For the uninitiated, it’s basically a forward-looking cashbook analysing all your expected income and costs. By doing this you can sort out a plan for the coming weeks and months that will allow you to meet your tax obligations, plan purchases, and estimate your working capital needs.
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This article is solely for information purposes. It’s not financial or other professional advice. For help, please contact BNZ or your professional adviser. No party, including BNZ, is liable for direct or indirect loss or damage resulting from the content of this article. Any opinions in this article are not necessarily shared by BNZ or anyone else.
References to third party websites are provided for your convenience only. BNZ accepts no responsibility for the availability or content of such websites.
For CashFlow Plus, lending criteria, terms and fees, and conditions apply.