Ways to improve your cashflow

It is not the economy or rising prices which have the greatest affect on Australia's 1.7 million small and medium-sized businesses.

Cashflow is the major issue that keeps business owners awake at night, according to a National Australia Bank survey.

The survey says businesses often experience cashflow problems as they grow.

As your company grows, your cash management needs may become more complex but this should not hold you back from maintaining good cashflow practices. "A cashflow crisis can occur in the best business. Profit doesn't automatically equal cash."

There are several ways for business owners to improve their cashflow.

• Reduce lazy cash. Lazy cash can be tied up in inventories. Reducing excess stock or obtaining stock on consignment can help free up your cash.
• Manage your incomings and outgoings better. Receiving payment from your customers earlier and paying your suppliers later can improve your cashflow position. Managing slow paying customers and exposure to any one large customer also helps.
• Get your financing right. Short-term finance, such as an overdraft or invoice discounting, is designed to help manage weekly and seasonal variations. Longer-term finance should not be used to attack short-term cashflow problems.
• Plan ahead. Creating a forecast is a must. Your bookkeeper or accountant can help you.