Experts - Money Management for SMEs
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Five tips for better cash management purchases and overseas supplies (usually requiring prepayment or deposits). You should always, however, carefully read the terms and conditions of any Finance contract and have an achievable plan for repaying the debt.
JOSEPH ESSEY ASH is King! You may have heard this expression referring to the importance of cash flow in successful businesses. While there is no magic solution to remaining cash positive, there are some simple and practical things growing businesses can be doing to better manage this. Here are my top five tips for SME’s looking to better manage their cash flow.
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Forecast! Forecast! Forecast!
Working capital finance solutions
It is important to have a cash flow forecast, which lays the land for your cash outflow commitments and projected cash inflows, that you regularly refer to and update once actuals are realised. As a minimum I recommend having an annual forecast to project cash flow and financing requirements and monthly/weekly forecasts, which help you to ensure you are meeting your immediate obligations. The key to good business cash flow comes down to being smarter about how you manage the components of your supply chain. While employing good strategies, like the ones I have provided above, will improve your chances of remaining cash flow positive, it is not a matter of set and forget. Ongoing management and refinement of your tactics are required as conditions change – the best businesses are agile and tactile in all business operations. Disclaimer: This is article provides general advice and is not intended to be tailored accounting and financial advice. Advice may vary depending on your specific business circumstances.
The mistake a lot small businesses make is trying to grow their business without external finance. While debt should never replace free cash generated from profits, it is not the enemy if managed properly and for a purpose. In particular, I encourage using external finance to cashflow business equipment
Joseph Essey is the founder and operator of Your Business Finance Manager, an Outsourced Finance and Accounts solution for growing small businesses and has over 15 years’ experience helping small to medium sized businesses to manage their financial position and achieve sustainable growth. Visit: www.ybfmanager.com
Implement proper credit procedures with your customers Every business that allows customers time to pay their invoices needs to have a system for managing the collection of these debts. While there are many things you can do to improve your chances of getting paid here are some of the easiest and most effective to implement: • Advising customers of their payment terms and when their invoices will be due. This can be done in the form of welcome letter emails when you sign the customer up. • Have a plan to collect starting from when the debt is 1 day overdue. Many accounting systems allow you to send customised automated payment reminders direct from your system. • Make it easy for your customers to pay by offering multiple options including EFT and Credit card and clearly listing payment details on your invoices.
Maximise your free credit from suppliers If you are an established business with a decent credit rating there is usually an opportunity to get interest free credit terms from your suppliers. If you don’t already know, ask around to find the standard credit terms for your industry and as a minimum push your suppliers to provide these to you. It is also important that you know your business and personal credit rating. This can help you negotiate better deals or credit terms or, if you discover there is an issue with your rating, there are steps you can take to repair your credit file and improve your chances of getting credit from your suppliers.
Using a credit card smarter If used wisely, a credit card can be an easy and cheap additional line of credit with suppliers. Using wisely means avoiding paying Vendors that charge a high surcharge, always paying the balance due on time so you don’t incur interest and maximising credit by timing payments to be made at the beginning of the statement cycle.
Experts - Networking
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Local purchasing power unleashed AMANDA BRISOT HE recent disruption of global commerce due to the Coronavirus pandemic and the trade conflict with China has highlighted the importance of creating a diverse supply chain that contains a good mix of local suppliers to avoid production and supply disturbances. Furthermore, purchasing locally and engaging with a local supply chain generates social and economic benefits far beyond the products and services themselves. Research shows that for every dollar spent locally the economic multiplier is four times more than trading with a business from outside the area. According to Australian Made, for every one million dollars spent with an Australian manufacturer $333,900 in tax revenue is generated and 10 full-time jobs are created. It’s not hard to see then, that for a region like Western Sydney, which still has many pockets of disadvantage, local procurement is an incredibly powerful economic development tool. If done effectively it has the power to boost the economy, drive jobs and reinvigorate depressed or marginalised communities. When a large corporation wins a multi-million-dollar government project, it is often easy to continue using the suppliers they have always used. However, if they use a local supplier, they will not only get the job done, they will also generate enormous economic benefit for the local economy. After all, a local business is far more likely to use local workers and service providers such as accountants, lawyers and cleaners for example, who then go back to their local area to spend their money.
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A WSBC Meet The Buyer Event.
Local prefers local It’s not all about giving back. There are lots of benefits for big business too. By building a diverse supply chain, big business can maintain competitive tension within their supplier base, ultimately resulting in better quality and price. By using a local supplier, big business will also have better and quicker access to resolve quality issues and suppliers will be faster to respond when something goes wrong. Not to mention the shorter lead times and transport costs and the impact that this has on the final goods carbon footprint. It can often be challenging for big busi-
WESTERN SYDNEY BUSINESS ACCESS MAY 2021
ness to tap into a database of local suppliers and many small to medium-sized enterprises (SMEs) struggle with that initial step of getting in the door of large corporations. Western Sydney Business Connection has come up with a practical way to bring big business and SMEs together. Often referred to as “speed dating for business”, WSBC’s Meet the Buyer event series connects local SMEs to large corporations responsible for delivering the region’s major projects. Participating SMEs are strategically matched to large procurers and then scheduled to meet one-on-one every 15 minutes
to pitch their products and services and to build relationships. The series has been well received by industry and is seen as an outcomes driven program that has achieved excellent results. To date, over 1000 meetings have been scheduled between large corporations and local SMEs, with 20% of SMEs securing contracts and a further 40% having work in the pipeline. Amanda Brisot is the General Manager of the Western Sydney Business Connection, the longest standing, leading business engagement organisation in the region. To learn more go to wsbc.org.au.
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