Cashflow or money issues are one of the top challenges that business owners face. How do we know? We’ve surveyed over ten thousand of them in the past decade.
After speaking to a number of experts in the field, we compiled a training module as part of our Business Ownership program and in this article I’d like to share a few quick tips with you.
1. Know what money is yours
A lot of business owners get into trouble because they don’t know at any given time what money in their bank account is actually theirs. As opposed to tax owed to the ATO, or super which should be put aside.
A simple solution for this is to create at least three bank accounts in your business.
Then as soon as money comes in from an invoice, set aside the GST in one account, along with an allocation for tax.
In the other, put aside some reserves to cover wages and super payments, and other outgoings BEFORE you spend any money on business operations or your own wages.
Your accountant will help you plan cashflows, but this usually only occurs on a quarterly basis, which can be plenty of time to get into trouble spending money that isn’t yours.
2. Invoice and collect on time - a friend of mine recently had to help a business who hadn’t invoiced close to $2m of work they had done for clients. This poor administration had got them into serious cashflow problems - but the money was actually there - it just hadn’t been invoiced and collected
3. Price right - many business owners don’t know their true value and they don’t price accordingly - in other words they are undercharging for their work. Or conversely, they don’t provide enough value to justify their prices and so they don’t get enough volume of work. Knowing your value in a market, and choosing a market position where you can make a good profit or margin is critical for business survival.
If you are a small business trying to compete on price against a big business, you’re in for trouble. And if clients don’t value you, then work harder to create a more valuable proposition for the market in which you operate.
Hope these help you towards a better money management system in your business.
Take more control with these tips and you’ll be in better shape before you know it.
Enjoy the journey