Ask most business owners what their biggest challenge is and 9 times out of 10 the answer is cashflow. For startups this is even more difficult, especially in the technology arena where significant money is spent on research and development before go to market is achievable.
The Australian Securities and Investment Commission (ASIC) reported that poor cashflow was a key factor in almost half of all firm failures in 2016. That is not surprising since a recent research uncovered that Australian businesses are chasing up to $76 billion in unpaid bills from customers.
As a startup how can you get control of your cash flow?
Here are our top 7 tips for getting ahead with your cashflow.
1. Cut unnecessary spending.
Make sure you are regularly reviewing your expenditure reporting and ensure that everything you are spending is important. Make sure you are getting the best price for what you are buying and don’t be afraid to ask for a discount.
2. Set up a credit control system
Put contracts in place with customers where appropriate, and have a system in place to ensure that you are following up with non paying customers. Also have a good debt collection agency in your tool kit in case you need to refer a bad debt.
3. Direct Debit
Where you have customers paying you every week or month ask them to go on a direct debit arrangement. This can ensure that you get paid on time and the client doesn’t have to worry about remembering to pay you.
4. Give people payment options
Offering as many different payment options as you can will help them pay you. Allow them to pay via credit card, PayPal, direct deposit or even bitcoin can help you get quicker payments.
5. Payments in advance
Often we charge customers in arrears. For those that bill monthly in arrears the lead time is excruciating. You could be performing work in April, bill in May and if they are a lazy payer you may not get paid till June. Something as simple as charging for the services in advance can give you an injection of much needed funds. In this case you would be paid at the beginning of April, before you have even commenced work. This provides the funds to pay for wages and materials needed in order to carry out the job.
6. Stay in touch with lenders
Keep in touch with your banks, lenders and debtors. Ensure that you are keeping them informed of how you are tracking and where you need extra support.
7. Put your GST away
If you are charging GST then every time you take a payment you need to put the GST component in a separate bank account. This way when you completed your quarterly BAS to the ATO you have the funds that owe to them all ready to go and you aren’t managing a tax debt.
For support with your start up budget and accounting make sure you talk to our team of specialists.