August 7, 2012
Accounting & Taxation, Financial Strategy, Improve Cashflow, Increase Profit
We’ve now spent some time in Part 1 here Mapping out what’s needed to increase the cashflow in your business. Remember, it could’ve been that you needed to increase Gross Profit or it could’ve be to spend time Reducing Expenses. It could’ve been to work on your Cashflow Cycle - Debtors, Creditors and Inventory. It may be that you needed to Refinance to ensure repayments are in line with current trading conditions. Or it might be that a better Tax Structure would save you thousands, positively impacting your cashflow.
Regardless of what it was for you, it’s now time to spend some time in the Move phase – which will Move you towards the results!
Of course, you may find that there are multiple strategies you need to Move in your business. Regardless of how many strategies and what they are, bear this in mind – It’s better to do a few things very well than lots of things poorly. Don’t try to change your business overnight. Do it properly rather than quickly.
I'll run through a few common areas of cashflow concern that we often work on with our small business clients. I’ll then show you some strategies to turn those issues around.
Number one is increasing profits.
While it’s possible to have bad cashflow when you have good profits, you’ll almost never have good cashflow if profitability is low. Remember, all things being equal if you increase your profit, you will increase your cashflow. Here is one strategy that will absolutely Move your profit in the right direction – Promote your highest margin products or services first.
Depending on your industry, the way you could achieve this could be through your advertising, in store promotions, social media or any other promotional activity. However you do it, make sure you aren't promoting goods that have low margins. This sounds like common sense, but you'd be amazed at how many times we've had great success with our clients by simply implementing this as a strategy.
Number two is to reduce your taxes.
You all hear the saying about two certainties in life; death, and taxes. When it comes to business, yes we have to pay tax but if cashflow is a problem, please make sure you are not paying a cent more than you legally need to.
You can Move the amount of tax you’re paying each year through annual tax planning, restructuring your legal structure to suit your business’ financial performance or making sure you are using all relevant tax advantages. We have saved clients more than $250,000 from tax planning and even if your amount is much lower than this, it will still improve your cashflow.
Thirdly, reduce your debtors.
Our clients often come to us to help in this area and fortunately for them, we have pile of strategies they can implement to help reduce their debtors. However, please don’t limit yourself to just trying to call in your debtors sooner. Collect your money as soon as you can but remember, there plenty of other things to do as well.
The three best strategies I’ve seen to Move your debtors is having very strict payment terms up front and religiously adhere to them, get your invoicing done as soon as possible , and have a clearly defined debtors system so that nothing is left to chance.
If you’ve found any of these strategies relevant for you, make sure you Move today and schedule a time to get to work on them. Cashflow improvement is not a one off activity and it’s not going to fix itself. You will need the discipline to be continually working on cashflow improvement in order to produce consistent results. The results (and the money in the bank) is worth it!
And if you’d like some more strategies to help put more money in the bank, join us at our upcoming events “The 7 Simple Steps to Guaranteed Cashflow Success” on August 21st and 22nd.