Make This Financial Year Your Best Year Yet
Every year brings new challenges for business, but it is also an opportunity.
Numerous pitfalls could trip you up as you march towards your aspirations. Being aware of grey areas and tackling problems such as cash flow issues, debt management problems, and taxation could help you steer your business in the right direction.
Explore cash flow solutions.
When it comes to business, cash is king. Capital is the oxygen that gets business working, and cash flow carries that power through the organisation. It’s no surprise businesses need to know where they stand in terms of cash flow at any given point in time.
Manage your working capital.
Your working capital is your monthly outlay on your regular expenses, required to carry out your business operations. This includes the amount of money that you would pay your suppliers and for infrastructure, and also your salary expenses.
The rule of thumb is that businesses should have enough cash in their kitty to see through their working capital for a three month period. While this may not always be possible, it is advisable to make alternative arrangements such as getting overdraft facilities from banks or ensuring the availability of personal finances as a contingency.
Manage your cash flow cycle.
Every business is unique, and it helps for you to understand and manage your also unique, cash flow cycle. If you invoice your clients on completion of every project, your cash flow may not be regular, since each project could vary in size and duration. This could mean that you have a significant injection of cash on completion of one project, while you may not have much cash flow at all in the case of a small project.
On the other hand, if you were to invoice on a specific day of the month every month, with your invoices being paid after 30 days, you may have to wait two months after you complete a project but your cash flow would be regular.
The key to managing your cash is to understand your cash flow patterns and manage your own working capital requirements accordingly. Working out options such as engaging customers on a regular subscription where possible, keeping inventories down to a minimum, and negotiating with your suppliers to adjust your payments in line with your income are some steps you could take to manage your cash flow better.
Embrace debt management software.
Debt is an inevitable part of business. However, debt has to be managed to keep the business going. With numerous modes of payments, cash advances, overdraft facilities and other cash flow considerations, debt could well exceed acceptable limits or could be difficult to keep track of.
One solution is to invest in debt management software that helps you stay on top of your finances. Investing in accounting software would help you keep track of your expenses and debts, provide you with a snapshot of where your business stands in terms of debt management and servicing at any point in time, project future cash flow outlooks, and provide you with warning signals as you become over-leveraged.
Save or defer tax.
There are two certainties in life: death and taxes. While there may not be ways to escape the former yet, you could certainly save on or defer taxes. Spending on your business is an important way of saving on your taxes. Plan to invest in assets as you head towards the end of this new financial year to defer your taxes. It could be an investment in gadgets, computers or networking gear.
The same logic also applies to prepaying your bills. Advance your bills at the end of the financial year, and you not only save on taxes for this year but could also negotiate with your suppliers for better rates.
There are numerous ways you could make this new financial year the best one yet for your business.
Consulting with specialists could help you manage your finances, debts, and taxation and pave the way for business success. If you would like to know more, please feel free to comment below.
“The opinions expressed by Smallville Contributors are their own, not those of www.smallville.com.au"
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