The cashflow cycle can be shortened through investing in R&D to cut production times or choosing alternate freight options that reduce the time your goods are in transit.

To extend the life of your business’ cash, old fashioned frugalness can go a long way. Consider any purchases in light of potential future cashflow constraints, while always seeking savings through negotiation, shopping around, buying second hand or avoiding non-essential costs altogether.

The level of demands placed on your business during the cashflow cycle can also be reduced through minimising stock levels to those absolutely necessary at any given point in time, thereby reducing stock holding costs, spoilage, shrinkage, storage, handling and insurance costs.

RECEIVING THE KING

For most businesses, the effective or ineffective management of receivables will have the single biggest impact on cashflow. Timely invoicing to your customers is essential – sending these electronically will ensure your invoice is not only received earlier than via snail mail, but will provide a record confirming the date it was sent.

Proactive but courteous follow up of payments will reduce your number of slow paying clients. While most of us would be reluctant to consider the possibility that customers won’t pay, if the worst does happen, don’t be afraid to utilise the services of a reputable collections agent or pay a visit to the small claims court rather than leave a debt owing almost a year, or worse, writing it off.

To provide an incentive for early or prompt payments, you may like to offer modest discounts off your invoice amounts. However, compare how this stacks up to opportunities available through borrowing. Another way to provide a similar incentive is by charging penalties for late payment, although this may be difficult to enforce on good customers.

For large orders, it is common practice for many companies to ask for deposits, but be mindful of potential GST implications following the ATO change earlier this year, which requires businesses to adjust their GST calculations on part payments for orders, typically deposits of 10 percent or more. This means that for the many businesses that account for GST on a non-cash basis, receipt of a part payment requires remittance of the GST on the full value of the order, even though full payment is yet to be received.

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