Running a business comes with a wide variety of challenges, but one of the biggest is in ensuring a positive cash flow. In a volatile market, cash flow problems may hinder your business from achieving its full potential. To enable your business to capitalise on new waves of growth, strengthen your business’ financial capabilities and keep 10 to 20 percent of monthly revenues on hand. Find out how you can overcome financial roadblocks with these useful tips.
To carry on a sustainable business, implement sound financial controls such as policies and processes and ensure you comply with accounting standards in Singapore. Tracking your account payables, accounts receivables and inventory turnover can help you make critical risk management decisions and form financial strategies that can make an impact on your success.Stay updated on your financial position and cash flow by reviewing your financial statements regularly. This helps you spot business risks and respond quickly to any discrepancies. Robust financial management also shows your potential partners and clients that your business is sustainable, reliable and profitable. For a start, lock in regular financial reporting dates 6 months in advance to ensure you make time for regular reviews.
Review invoicing policy
Whenever you issue an invoice, ensure that your company’s payment terms are clearly stated. Should your client fail to make payment by the due date, follow up with a reminder. It is good practice to send reminders a few days before payment is due, the day payment is due, and a few days after. If payment is still not made, give your client a call and continue sending reminders.Since payment terms are typically net-30, i.e. due 30 days after the date of invoice, be consistent in enforcing your payment terms and include a late payment penalty for clients who fail to pay on time. Be upfront about late payment penalties, when they will kick in, and how much will be charged. Include these payment rules in the “terms and conditions” section of your invoice. Before you decide on late payment penalties though, research on what’s the industry norm.You can also offer a discount to incentivise early payment. If you would like to receive the payment as early as within the first week, offer a small discount. Clients who are looking for a deal will be more likely to pay their invoices faster, which gets you the cash faster.
Evaluate operating expenses
Besides ensuring a steady stream of cash inflow, cash flow must be managed by limiting your outflow. Businesses must manage their operating expenses just as much as their sales.As you look through your cash flow statement, analyse your pattern of expenditure and try to optimise your spending. Find out if your expenses are really necessary and cut down on unnecessary ones. If the purchases are vital, look out for cheaper alternatives. Though this exercise may be a challenge, you will feel better knowing that you are managing your expenses effectively.In addition, study your business processes and brainstorm for ways to speed up or improve each process. For instance, to cut down on hefty overtime wages, is it possible to introduce new invoicing software to help you track invoice deadlines? Is it useful to implement a new stock-taking application to help your staff better organise inventory? At the very least, you can cut down on overtime pay. By deploying your resources more efficiently, this gives your business an edge over the rest and help you get more done with less.
Review payment plans
Once you have established a good relationship with your suppliers, do not forget to negotiate for discounts for buying inventory in bulk. These discounts can significantly improve your cash flow.However, if your business is in the red, take a look at your list of creditors and decide who gets paid and when. It is tough to not feel pressured by calls and emails, but it is a good idea to pay those that are most vital to the furtherance of your business operations first. For the rest of your suppliers, share with them that you have placed them on your payment list whenever they come knocking. Assure them that you have not forgotten about them and let them know they will be paid as soon as possible.It is also a good idea to review your purchases from non-crucial suppliers. If you are struggling with your cash flow, perhaps pay such vendors only when you have the extra funds. Prioritise and pay those suppliers whose services or goods are most important to the continuation of your business.
Seek expert help
Well-designed financial controls and processes are essential, but they need to be managed by the right people in order to make a difference. Hire someone with experience in financial management, or invest in your staff by equipping them with the relevant skills and inculcating financial knowledge and discipline.If your team is new to accounting and don’t know where to start, consider engaging a consultant or corporate services provider who can advise you on budgeting and cash flow management. A third party’s perspective can help identify business blind spots and bring new ideas and solutions to the table too. Think of these outsourced services as an investment rather than an expense. An external accounting professional can review cash flow projections, provide insights into areas that you may have overlooked, and help you anticipate and plan for cash-flow problems.
If you currently lack the funds to engage a financial consultant, consider applying for loans or government grants such as the Capability Development Grant to alleviate part of the cost.
At Corporate Services Singapore, our accounting professionals can guide you and provide specialist advice on how your company can stay on track with its cash flow.
Access expert financial advice and solutions and stay on top of your business with Corporate Services Singapore. To find out more about our customised outsourced accounting services, give us a call at 6602 8286 or email us at firstname.lastname@example.org to get started today.