Avoiding Cashflow Pitfalls

One of the leading causes of failure for new startups is poor cashflow and a lack of capital. To thrive, businesses need sufficient funds to cover expenses, pay their workforce, and invest in growth. Strong cashflow management is what separates successful businesses from those that falter.

So, how can you improve your cash position and stay in control of your financial future?

Below are five simple ways to take a more proactive approach to your finances:

1. Embrace financial technology and cloud accounting

Mastering your accounting software allows you to make smarter financial decisions. Make sure you’re using cloud-accounting solutions like Xero with integrated bank feeds, expense tracking, simple invoicing and a real-time view of your numbers. You can also use the advanced reporting features to get deep insights into financial performance and cashflow position. Use financial metrics and KPIs to monitor performance.

Develop a framework of financial key performance indicators (KPIs) including gross profit margins, operating expenses, customer acquisition costs and revenue growth rates. By tracking these metrics, you can gauge your performance, spot any financial threats and make well-informed decisions about your financial management.

2. Forecast your cashflow position and potential challenges

Staying ahead of cashflow challenges requires forward-thinking and reliable forecasting tools. These projections give you an overview of your cash position for the months ahead, allowing you to top up your cash as required. It’s also sensible to build up some meaningful cash reserves, so you have capital behind you when cashflow gets tight.

3. Work on your aged debt and debtor management

It’s important that customers pay on time and that your payment terms are clear. Use your accounting software to send out automated reminders. By proactively managing aged debt and maintaining strong debtor controls, you can reduce payment delays, improve cashflow, and strengthen your business’s financial position.

4. Get strategic with your working capital and access to finance

Maintaining a healthy level of working capital is essential for keeping your business operations running smoothly. When cash is tight, exploring financing options can provide the additional capital you need to support growth, cover expenses, or navigate challenging periods.

5. Talk to us about ways to improve your digital transformation

In today’s digital age, there has never been a better time to take control of your finances. With the right financial and accounting tools, you can supercharge your cashflow management and position your business for sustained success.

If you’re looking to upgrade your financial management, contact your Client Advisor or send us a message if you wish to discuss this further.