No matter how long you’ve been in business or how successful you are, you’re bound to be faced with cash flow challenges from time to time. Often, it’s not through poor management, simply the ebb and flow of the business tide that can be difficult to predict.
In our current business climate, things can change rapidly. You may be able to plan to some extent for a seasonal rise or fall, an increase in staffing costs or bad debtors eating into your profits. It is more difficult to predict a tech-savvy start-up ready to swipe your existing customer base, or the disruptor who comes out of left field with no warning at all.
We can think we’re immune – “I’ve been in business 30 years” – or “My customers are loyal” – and you may be, but it pays to be prepared. Understanding the trends that impact your business while having an effective cash flow forecast can help keep you on the right track. You’ll be better equipped to deal with a sudden downturn or an unexpected hit to your cash flow.
As the saying goes ‘cash is king,’ so how can you preserve the cash in your business and keep it flowing in the right direction – into your bank account?
Make it easy for payments to come in
Ensure the payment process for your customers is simple, streamlined and fast. You want to make it as easy as possible for payments to be transferred from your customer to you. Of course most businesses today accept credit card, using payWave if you have business premises. Online payments and the use of payment apps are also a great option for customers and are easy for you to track.
Package up your payments
Offer your customers payment packages so you can predict your income with greater accuracy. Your customers will also enjoy the convenience of paying by installments. It could be a deposit down with scheduled payments or billing upfront with a repayment plan. You might also use a third party platform such as Afterpay to manage these accounts.
Knowing when money is scheduled to come into your business gives you the ability to plan your own spending while focusing on marketing for those slump periods.
Be clear with your payment terms
Make your payment terms clear from the start. Display them on your website and/or instore. Explain the terms to your customer before they sign on the dotted line. This will help your customers know when their payments are due and reduce any overdue payments.
Look for ways to save on expenses
Don’t get complacent with suppliers. Look for savings wherever possible. If you regularly review your outgoings and compare options, you may find you can save thousands, even tens of thousands of dollars a year. You may not be able to budge on your fixed costs such as rent, wages and tax, but you can always find some savings when you look into expenses such as electricity and phone, printing, advertising, computer services and car maintenance. Every dollar you save can be invested back into growing your business, or improving your lifestyle!
Conserve your cash wherever possible
Bartercard provides a great opportunity for you to conserve your cash so you spend less and keep more of it in your business. Bartercard is an alternative payment option that enables you to buy and sell your products or services with other Bartercard members. Instead of paying in cash, Bartercard members use an electronic currency called a Trade Dollar. These Trade Dollars can then be used to offset cash expenses within your business.
Trade Dollars are a well-recognised and accepted method of payment in Australia. One Trade Dollar is equivalent to one Australian dollar for all accounting and taxation purposes.
Let’s do the math on using trade dollars
Assuming your fixed overhead costs (such as rent and wages) are already covered with your cash customers. Let’s hope they are or you’re in strife already! Let’s also assume that your business is in a position to take on new customers – wouldn’t that be great?
To supply a Bartercard member with your product or service, the only cost to you is the replacement or variable cost. Everything else is your profit. So in effect, when you make a purchase using Trade Dollars, you are getting a concession equal to your Gross Margin Profit (GMP.)
Bartercard customers are also more motivated to spend their Trade Dollars with you as they’re also paying with their GMP, so they’re conserving cash as well.
The beauty is, your new Bartercard customers who pay with their Trade Dollars will not interfere with your existing business, but simply add to it! As a bonus, if these new Bartercard customers like what you do, they’ll refer their friends and colleagues to you – most of them being cash customers.
To find out how Bartercard can help keep more cash in your business by utilising Trade Dollars contact us today.