8 Ways to Improve Cash Flow

Your business, just like a car, has many moving parts to keep it running. Every part is important and reliant on other parts to operate however without cash in the business or petrol in the car they simply won’t get very far. ‘Cash is King’, we all know this saying and it is definitely true.

Every moving part affects cash flow and below are some tips on how to ensure all of these parts are running effectively to support a healthy positive cash flow:

  1. Make a Profit – This is obvious as no profit means no surplus funds and your cash will inevitably go backwards, however profit does not mean that you will have positive cash flow. I’ve seen highly profitable businesses struggling to survive due to poor cash flow crippling its operation. Refer to 10 ways to maximise profits and reduce corporate stress.
  2. Ensure Customer Invoices are Paid on Time – Implement an Accounts Receivable policy to ensure you are working with reputable customers who are able to pay and pay on time. Have a process for collecting your invoice payments on time. Refer to How to build a watertight accounts receivable process.
  3. Align Customer and Supplier Terms – If your suppliers require payment of their invoices within 14 days but your customers aren’t paying you before 30 days then you will always run into trouble if you don’t have a healthy bank balance. Seek to have your supplier terms longer days than your customer invoice terms.
  4. Improve Inventory Management – Every bit of inventory you have in stock is idle cash. Know your best-selling products and your less popular products and order accordingly. If you have too much of a less popular product on hand, discount the products to get them sold. Cash in your hand is more valuable.
  5. Forecast when Quoting and Tendering Projects – When you are quoting or tendering for a project try to have your milestone payments as evenly spread as possible. If doable also try and work into the quote or tender a deposit requirement to get started or a payment due on signing the contract. From the day a project starts, if your business works on 30 day terms with its customers and you invoice at the end of the month this could mean that it will be almost two months before your first payment is received after the project has started. In that two months you will need to pay employees and contractors working on the project and also any material required before the first payment is received leaving a large hole in the bank balance.
  6. Lease or Finance Assets, Don’t Buy – Most of the time the assets you buy are depreciating in value over time. Don’t tie your cash up in something that is losing value. Keep your cash in the bank and use finance to purchase an asset.
  7. Forecast Growth – When a business is going through a large growth phase and it ramps up really fast, it is really exciting but most of the time the cash flow will suffer. There needs to be some large inventory purchases or hiring of more staff or some big asset purchases to support the growth however the revenue and profits from this growth may not be seen for a couple of months if you are working on 30 day terms with your customers.
  8. Do Budgeting, Revenue Projections and Cash Flow Modelling – Do a budget for the year including a revenue projection to know what lies ahead. What are your good months and what are your bad months? Put all of this information into a Cash Flow model which takes into account all of your income, expenses, liability payments and bank balances including the timing of these payments to see when cash will be tight. This will allow you to plan for the rainy day and assist in making various purchasing and business decisions.

If you require assistance please contact us on 1300 978 320 or info@spire-business.com.au.

Happy New Financial Year!!!

2019 prosperity year concept

Welcome to the 2019 financial year. Time to move on from 2018 and look to the year ahead.
What do you want from your business in the 2019 financial year? What are your goals? What do you want to improve? What do you want to start, stop and keep doing?
Setting some new financial year resolutions and putting them into action is always a great step towards achieving your goals and ensuring your business is on the road to success. The following article gives some great guidance:
New Year’s accounting resolutions
If you require any assistance please contact us on 1300 978 320 or info@spire-business.com.au to organise your free consultation now. Hope your 2019 financial year is all that you hoped for and more.



Your business is crazily busy with a healthy revenue and consistent sales and the general feel is that you have a successful business. Then it’s time to run a Profit and Loss Statement for the last month, quarter, 6 months or full year and the bottom line is not giving you that same feel. Your return on effort, investment, knowledge and skills (blood, sweat and tears) is not there and stress levels are rising.
If this is all too familiar for you then please read on. If you’re gaining success at the top and bottom of your Profit and Loss, then also please read on as there may still be areas of improvement.
When a business is not making the desired profits or in some cases it is making a loss month on month, there are a number of levers that can be pulled to turn this around. When reading this, know that not all are possible depending on the industry you are in and customers you have.
  1. Increase your Sale Price by 2-3% – Depending on the climate of the customers and industry that you operate in this may be an easy step and accepted quite well from your customers.
  2. Decrease Direct Costs – Go through all of your direct cost line items and identify processes that could be made more efficient, materials or services that could be purchased for less without a decrease in quality and legacy costs that can be stopped.
  3. Decrease Overheads – Go through all of your overhead cost line items and identify where you could cut back on costs or get more bang for your buck. Is the space you’re operating out of too big and therefore costing you too much? Can you sublet some of your space? Can you get a better deal on electricity or your photocopier lease? Is your stationery supplier too expensive?
  4. Maintain a healthy gross profit margin to support your overheads – This is a process that your trusted advisor can help you with for your particular business. The Australian Taxation Office also supplies small business benchmarks and the ability to do a Business Performance Check using the ATO App – https://www.ato.gov.au/business/small-business-benchmarks/compare-your-business-now/. Once the desired margin is determined this needs to be maintained at the point of sale. Yes, you may sell some products or services with a lower margin for a strategic purpose to win a customer or get into a particular industry, but this should be a one off and have the potential to win more work at your desired or higher margins.
  5. Set budgets, Key Performance Indicator’s (KPI’s) and targets for points 1, 2, 3 and 4 and report on them regularly – DO NOT FLY BLIND. Have a report pack that you view every month and compare to the budgets, KPI’s and targets that you have set. This will help you fix anything that is broken sooner rather than later or reward staff on performance and motivate. Set KPI’s/targets for your staff that are tied to their remuneration or bonus structure.
  6. Do a review of product lines or service offerings:
    1. Is there a product line or service offering that needs to be discontinued due to low returns?
    2. Is there a product line or service offering that you may be able to start offering that will earn you higher returns?
    3. Is there a product line or service offering that can be improved or tweaked to increase its returns?
    4. Do you need to diversify your product line or service offering more so that all your eggs are not in the one basket?
  7. Do a review of your staff and their roles to increase motivation and find efficiencies:
    1. Are there people underperforming that need to go?
    2. Are there people that could do more?
    3. Are there people that should be doing less and in turn be more motivated?
    4. Are there tasks/roles that could be completed by one person rather than multiple people?
    5. Are there any roles that can be automated using technology?
    6. Are there roles that are not necessary?
    7. Is there a role that may need to be created such as a General Manager or Business Development Manager role?
  8. Increase and do better with your Business Development efforts
    1. Reassess how you Promote your business
    2. Lock down your proposition or offer
    3. Increase your leads
    4. Get better at talking to your leads, closing sales and asking for referrals
    5. Do more networking
    6. Look for new sectors or industries to move into
    7. Look for opportunities to sell to your current customers more services and products and more often
    8. Talk to your customers, know your customers and build relationships with your customers to know what they want or what you could do better. Keep them happy, keep them coming to you and buying from you.
  9. Determine, lock down and stick to your Why, How and What. These should be communicated publicly and within your organisation. LIVE AND BREATHE THESE:
    1. Your Why (Mission)? – Why do you get up everyday and go to work to run your business?
    2. Your How (Values)? – What are your strengths and values that define your business and differentiate yourself from your competition?
    3. Your What (Vision)? – What do you do and what do you want to become?
  10. Prepare a detailed Strategic and/or Business Plan with your trusted advisor incorporating all of the above. Spire Business Services is always here to help you with any of the above. Please contact us to discuss further on 1300 978 320 or info@spire-business.com.au.