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Managing Cashflow

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Running out of cash is one of those fears that keeps business owners awake at night. It's also one of the main reasons businesses fail. That's why it's essential to stay on top of cash flow.

We all know cash is the lifeblood of a business. But better cash flow does more than simply keep your business healthy.

By managing cash more effectively, you can reduce the working capital tied up in your business, freeing money for other purposes — and earning a higher rate of return on your capital in the process.

Step 1. Work out where you are

If your cash is scattered across accounts with different banks, it can be difficult to get a clear view of your current cash flow position.

An easy first step is to bring your accounts together with IMB, giving you a complete snapshot of your cash position, 24 hours a day, through our online banking service. We can help you make the most of your money in other ways, too.

Step 2. Find out where you're going

The next step is to create a month-by-month cash flow forecast. It's an essential tool that helps you spot potential problems in advance, then take action to avoid them.

Start by forecasting all of your fixed costs, such as rent, salaries and interest. Then add in your projected revenue, along with variable costs like stock, supplies and marketing.

With your forecast in place, you can start planning for seasonal ups and downs in sales, along with other potential cash flow hiccups.

Step 3. Take control of accounts receivable

This is the area where many otherwise successful businesses fall down. If you sell on credit, you need strong accounting systems to track and finalise accounts receivable.

The key is to be active and consistent. Invoice promptly, spell out your terms of trade, and follow up unpaid accounts rapidly. If necessary, ask for a deposit or payment in advance. Depending on your business, you could also consider using debtor finance to accelerate cash flow even further.

Step 4. Create a safety net

No matter how good your cash flow, your business is likely to need some extra cash from time to time. One option is to create a cash reserve in a high-interest savings account, so you can access it when you need it. Alternatively, apply for a business overdraft or line of credit that you can draw on when money is tight, then repay when business picks up. Remember, it’s always easier to arrange funding when times are good, rather than waiting until you're under cash flow pressure.

How to make your cash work harder

  1. Avoid buying long-term business assets  from cash flow. Consider using asset finance so that you can  acquire now, then pay them off over their economic life.
  2.  Monitor stock levels and equipment. Turn over excess stock, even at a discount to  generate cash.
  3. Look for cash reserves in your business, then put them to work in a term deposit or high-interest Cash Management account. For example, if you've set money aside for GST or employee super, you can earn  additional interest  prior to account payment.

Talk to us

Our experienced Relationship Managers can help you fine-tune your business cash flow for maximum efficiency. Here are some of the ways IMB is different:

  • You’ll receive personalised service from a team who are part of the community where you live and work, not a faceless call centre. Our Business Banking specialists have decades of experience helping businesses just like yours through good times and bad.
  •  We offer a full range of business solutions — from EFTPOS and overdrafts to leases and debtor finance — all at very competitive rates.
  • We’re also one of the few commercial lenders to offer 25 year loan terms, so you can manage your repayments to suit your business cash flow.

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The information presented is of a general nature and is not intended to be relied upon as a substitute for financial advice. Lending criteria, terms and conditions, fees and charges apply. Consider the PDS before making a decision to acquire any of these products.

  • It all comes back to you.