Speed your incomings
Do you have big jobs coming up where you can ask for a 20 percent deposit? One of Karen’s clients does large jobs – tens of thousands of dollars – and he wasn’t asking for money up front. “If you already ask for 20 percent down, ask for 30 percent,” advises BAS agent Karen Kennedy of Bookit Bookkeeping. “If there’s a way to get partial funds in the bank now, do it. Have a look around your business, too. Is there any equipment lying around that you no longer use? Now might be the time to liquidate it,” says Karen.
Slow your outgoings
If you have a 30-day account with a supplier, see if you can extend it to 45 days, says Karen. And take advantage of local government relief. For example, the Kingston City Council is offering to defer rates payments for more than a year for businesses that apply under a hardship policy. “If you’re going to be unable to pay your bills in full and on time, tell your suppliers and make arrangements; don’t just not pay without communicating,” says Ryan Richardson of TNM Consulting.
You want to preserve relationships which may have taken years to develop. That might mean offering to pay two-thirds of the bill when it’s due and the remainder in a few weeks, says Ryan. This approach goes for the tax office, too. “The ATO is being quite reasonable, offering many businesses interest-free payment plans,” says Ryan. “Consider what this means for future cash flow and financing options. The moment you stick your head in the sand rather than make a plan is when things start to escalate”.
Make it easy for customers to pay
Do you have Pay Now with Stripe set up on your invoices? This lets customers pay you on the spot with a credit or debit card. “If customers have to find your BSB and account numbers, many tend to put your bill aside and forget about it,” says Karen. “We did a job recently for a new client who’s a plumber. I emailed him the invoice, he hit the Pay Now button and I got paid right away.” A Xero analysis last year found customers using Stripe got paid as much as 12 days faster.
Review your prices
It might sound counterintuitive in tight times, but consider raising your prices. Your business costs go up every year – for example, employee award rates and electricity – and you need to apply at least CPI increases every year, says Karen. If not, you’re making less money for the same work. “I used to think, ‘My clients will leave me if I raise prices,’” says Karen. “But they don’t. People understand prices will go up just as my outgoings go up.” She cites McDonalds as an example. “They put up the price 5 or 10 cents every few months on their coffee, and no one really notices. I used to pay $4.80 for a coffee last year; now I pay $5.20”.
Use real-time data
Xero and other cloud-based services provide near real-time access to banking, accounting and forecasting data to help you make informed decisions. Xero recently unveiled three tools specifically aimed at cash flow in this difficult time, including short-term projections of your bank balance and a business snapshot showing key metrics.
“If you have time on your hands because of the downturn, this can be an opportunity to jump into business improvement mode,” says Ryan. “This may include reviewing your cloud-based business technology options”.
Tap local government stimulus
JobKeeper may have grabbed the news headlines, but don’t forget about economic relief at the state and local level. Many small businesses can overlook this aid. For example, the Business Victoria Support Fund is offering $500 million in merit-based grants, up to $10,000 each, for businesses affected by the COVID-19 shutdowns. New South Wales has a similar program.
Also check what’s available from your city council, says Ryan. “It’s up to you and your advisor to familiarise yourself with what’s out there,” says Ryan. “It’s a joint effort, and together we can get through this tough time”.
If you’re looking for more tips on managing cash flow, be sure to check out Xero’s Business Continuity Hub and new cash flow learning programme, Master your businesses cash flow. They cover the foundations of what makes up cash flow, how to create cash flow reports and interpret the data. They also provide guidance on how to apply for business finance.