Cash flow is critical to the success of any business, no matter how large or small. The problem is many businesses experience shortages of cash flow at some point in the life of their business.
Here are 6 steps a business owner can take to reduce expenses and improve cash flow.
1. Buy used equipment
Paying a premium for new equipment when you are struggling with expenses just doesn’t make sense. Used or reconditioned equipment is just as effective and can save you enormously in leasing costs. If you are serious about reducing expenses, don’t buy new equipment.
2. Ask for discounts from your suppliers
You don’t necessarily need to pay your suppliers early to obtain a decent discount. Simply ask for a reduction. You will be surprised how many suppliers will cooperate. The cost savings can be massive.
3. Shop around for the best price
If the current suppliers you are dealing with won’t give you a discount for being loyal, look elsewhere. It is important to make sure you are getting the best deal. This also applies for any new service or product you may require. Shop around until you are satisfied you have the best price.
4. Get a good Accountant
Small businesses often overlook the importance of a good accountant. If you only see your accountant at tax time, it is time to look for a new one. A good accountant could save you tens of thousands of dollars just by giving the correct advice with tax minimisation alone. As Kerry Packer once famously said “Of course I am minimising my tax. And if anybody in this country doesn't minimise their tax, they want their heads read, because as a government, I can tell you you're not spending it that well that we should be donating extra!”
5. Have a relationship with more than one bank
Mark Twain summed it up best- “A banker is a fellow who lends you his umbrella when the sun is shining and wants it back the minute it begins to rain.” Australia’s top 4 banks (in my opinion) have an appalling record when it comes to supporting small businesses. It is absolutely critical to develop a relationship with more than one bank. Businesses can’t take for granted that their current bank is always going to love them and lend them money. Dealing with more than one bank goes a long way to ensuring you are obtaining the best pricing available. 2nd tier banks can also be a good alternative and often bring common sense and service into the business relationship.
6. Get a Debtor Finance Facility
A Debtor Finance Facility is often a great solution for improving cash flow. Most small businesses throughout Australia will have heard of the term Invoice funding, Factoring or Receivables Finance. One of the best things with this type of facility is you aren’t borrowing any money; you are simply getting an immediate advance of cash against your outstanding invoices. Real Estate security usually isn’t required.
Integrating these 6 tips into your business will help you become more aware of expenses and ultimately improve your businesses cash flow position.