How to improve your business cash flow

One of the most critical issues for business owners is managing cash flow. Poor cash flow is not just a short term problem; it can also limit your business’s future growth plans.

A Wolters Kluwer survey revealed that small to medium enterprises in Australia may not be paying enough attention to their cash flow. Furthermore, 61 per cent of failed businesses surveyed said that a lack of proper cash flow management was the reason for their business’s failure.

David McKellar, Director of Allied Business Accountants, says there are four key things that business owners need to understand about cash flow to confidently make plans for their business:

• How long it takes customers to pay (Debtor Days)
• How much cash is tied up in stock or Work in Progress (WIP)
• The terms available with suppliers
• Level of overheads/running costs

With this information, business owners can determine how much working capital is required to fund their business for any given level of turnover.

As cash flow is ultimately a reflection of business profitability, it’s also important to regularly review your business performance, pricing, margins and expenditure to ensure you’re getting the best possible results.

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How to improve your business cash flow

Download our infographic for some simple tips to help you manage your cash flow and set yourself up on the road to business success.