Why Small Business Owners can’t get any sleep
Time management and cash flow concerns are keeping Small Business Owners (SBOs) awake at night. They are constantly fretting over slow paying debtors and an endless lack of time. I’m not going to bore you with statistics but if you’re interested, check out the graph below:
Slow paying debtors
Small businesses always seem to find themselves at the mercy of slow paying debtors. Picture your business as a scale, on one end you’ve got creditors and on the other end, you’ve got debtors. Unfortunately, big businesses don’t give you much time to pay (that phone bill is due ASAP), whilst debtors use small businesses as a source of working capital. According to the Australian Competition and Consumer Commission, three out of every four businesses are paid late (link). Thinking back to that scale, if your debtor pays on time the scale tips in your favour (providing cash flow), if that debtor pays late, the scale tips towards creditors – meaning debt.
Where does the time go?
Many SBOs complain they don’t have enough hours in the day to do everything that is required for their business. The majority work a minimum 50 hours per week (that’s roughly 10 hours a day for a five day week), yet state they still can’t get everything done. As much as they would like to explore alternative ways of improving their cash flow, they never have the time!
Unfortunately, technology hasn’t been as advantageous as we previously thought.
Reduce the risk
- Set a maximum figure for outstanding total invoices – if a customer has not settled their outstanding account, bar them from receiving more products or services until the account is settled
- Upfront pre-payment – Opt for upfront pre-payments with as many customers/clients as possible (i.e. service plans, fixed monthly plans, etc)
- Obtain part payments (milestone) for larger projects
- Pay your bills manually – opt for manual payments, rather than direct debit. This can help greatly with cash flow timing issues
Often cash flow problems are caused by out of date bookkeeping and slack financial management.
We can help
At RA Business Advisors, we can assist our clients with a whole range of services, including cash flow analysis. We can identify what’s blocking your incoming cash flow, and help you with strategies to overcome it. Sit down with one of our friendly advisors for a coffee and a chat.
To chat with one of our advisors call 07 3367 0852 or email firstname.lastname@example.org