Better Cashflow Management
A guide explaining smart and innovative ways to improve your business cashflow
Managing cashflow is one of the biggest challenges that New Zealand businesses face. We’ve put together some tips and tricks on things you can do to make it easier to ride those cashflow highs and lows through the year.
Here is what you’ll learn
Current version available for download: February 2020
Previously published version(s): August 2019
Preview: About this Guide
Cash is king, cashflow is the lifeblood of business and profits are meaningless without cash.
Whatever cliché takes the preference of your tongue, one cannot deny that they all ring true.
The other thing that rings true is the following: Cashflow is the prime cause of angst among those who own or run a business. And it’s not just start-up businesses where this can cause problems – even established, successful ones experience a cashflow crunch.
It’s nothing of which to be ashamed. It’s just par for course in the world of the business.
It’s also why Tax Management NZ (TMNZ) decided to stitch together this simple, easy-to-digest guide.
We know cashflow management is a skill, one that requires discipline. Sometimes business owners need some help to get things right.
Over the next few pages, our aim is to provide some tips and tricks on things you can do to improve your cashflow. This includes how to do a cashflow forecast, receive payments from customers faster, and simple ways you can keep more cash in your business.
We have also included a cashflow assessment that will enable you to assess the current health of your cashflow, and we run the rule over some services in the marketplace you might find useful.
As always, we hope you enjoy the read.
Guide sneak peak
About this Guide…
Cash is king, cashflow is the lifeblood of business and profits are meaningless without cash.
Whatever cliché takes the preference of your tongue, one cannot deny that they all ring true.
The other thing that rings true is the following: Cashflow is the prime cause of angst among
those who own or run a business. And it’s not just start-up businesses where this can cause problems – even established, successful ones experience a cashflow crunch.
It’s nothing of which to be ashamed. It’s just par for course in the world of the business.
It’s also why Tax Management NZ (TMNZ) decided to stitch together this simple, easy-to-digest guide.
We know cashflow management is a skill, one that requires discipline. Sometimes business owners need some help to get things right.
Over the next few pages, our aim is to provide some tips and tricks on things you can do to improve your cashflow. This includes how to do a cashflow forecast, receive payments from customers faster, and simple ways you can keep more cash in your business.
We have also included a cashflow assessment that will enable you to assess the current health of your cashflow, and we run the rule over some services in the marketplace you might find useful.
As always, we hope you enjoy the read.
Tax Management NZ
Does My Business Have Good Cashflow?
Good cashflow is essential to the success of your business.
A lot depends on the flow of money coming in and out. The problem, as you are probably all too aware of, is we don’t live in a perfect world where income and expenditure happen together.
However, if things are going well in the cashflow department, you should be able to cover any shortfall or expense.
On the following page are 10 questions you should ask yourself to determine the overall health of your cashflow position. Take the time to answer them honestly.
(pg 4)
1 Are there times of the year where you struggle to pay bills or expenses?
2 Does an unexpected bill or expense cause stress about how you are going to pay for it?
3 Are you ever having to wait for customers to pay you before you can settle what you owe your suppliers?
4 Do you have more expenses than income each month?
5 Are you struggling to keep up with current expenses? Are bills paid late?
6 Do you ever go into overdraft unexpectedly?
7 Do you regularly dip into your personal bank account to top up your business or use your credit card to cover expenses?
8 Are you putting off / cannot afford to pay taxes?
9 Have you stopped taking drawings or a salary from your business?
10 Is your business turning away orders/jobs because it cannot fund them?
If you answered YES to seven or more of these questions, then you might be experiencing, or about to experience a cashflow crisis.
The time is nigh to start thinking and seeking advice on how you can remedy the situation. The information on the pages that follow will help you do this.
(pg 5)
Common Cashflow Mistakes
Failing to forecast
Some business owners don’t forecast cashflow often or accurately. Others just don’t know how to go about tackling it. Whatever canoe you occupy, it’s important you know where your cash is coming from and the things you are spending it on. Taking the time to forecast your cashflow will help you manage your money and identify any potential issues before they become major ones that require a lot of time and effort to remedy.
Not having a rainy-day fund
There can be a tendency when things are going good to assume those good times will keep on keeping on. However, you never know when threatening storm clouds will swallow up those clear sunny skies. As such, be sure to build up your cash reserves when business is running hot. That way you will have money to tide you over during any lean periods you encounter. Besides, it’s easier to stockpile cash at times when your customers cannot get enough of you.
Slow invoicing or debt collecting
We get it – invoicing can be a boring, time-consuming process, especially if you have inadequate systems in place. But it’s true what they say: The squeakiest wheel always gets the oil. If you want to get paid quickly, make sure you don’t want for effort when it comes to billing clients and collecting payments. Your bank balance will thank you for it.
Avoiding these mistakes like someone on the ketogenic diet avoids starchy carbs and grains will serve you well when it comes to managing your cashflow.
(pg 6)