4 Clever Steps to Secure Your Company’s Cash Flow

SV Partners recently published their latest economic and insolvency analysis of businesses in Australia. The report produced a list of industries that are predicted to face financial difficulties within the next 12 months.

australian business at risk

Image source: SV Partners Resource Center
As shown in the image above, the top five industries that are at risk of default are:

  1. Construction
  2. Accommodation and Food Services
  3. Retail Trade
  4. Professional, Scientific, and Technical Services
  5. Manufacturing

The report also listed the top regions throughout Queensland, Victoria, and New South Wales where businesses are most vulnerable to financial strains in the next year. These include:

  1. Melbourne Inner
  2. Sydney City and Inner South
  3. Parramatta
  4. Brisbane Inner City
  5. Gold Coast

Why are they at risk?

Several factors were taken into account in order to properly predict the commercial risk of each industry. These include factors such as the behaviour of the business, mercantile enquiries, debt amounts, age of debt, financial defaults, and trade payment history. The researchers also looked at the likelihood of adverse events such as external administrations, court judgements, payment defaults, court writs, and petitions to wind up.

In addition, recent statistics from the Australian Securities & Investments Commission (ASIC) provided the researchers with the three most common reasons for business failure in the country. Specifically, these are:

  1. Inadequate cash flow or high cash use (18.8 %)
  2. Poor strategic management of business (18.8%)
  3. Poor financial control including lack of records (13.9%)

What can you do?

If your business belongs to the top five industries that are at risk of default, you must take extra precautions to strengthen and secure your cash flow. Slater Byrne has come up with the following steps to help you do just that:

1. Notice the signs

Sometimes we get too caught up in the everyday hustle of operating a business that we fail to see the little things that might be making us financially vulnerable. So, it’s important that you always keep an eye out for the tell-tale signs of commercial risk.

Company cashflow

Here are a few:

      • Continuing losses
      • Dishonoured cheques
      • No access to alternative funding
      • Overdue taxes
      • Poor relationships with lenders and other financial institutes
      • Inability to borrow additional funds
      • Leaving creditors unpaid beyond normal or industry trading terms
      • Inability to provide accurate financial information

If you see any of these signs in your company, you must get in touch with a professional to help you address the issues right away. Our expert team here at Slater Byrne are always on hand to assist you with these matters.

2. Create a cash flow forecast

To make sure you will always have enough funds to keep your business going, you need to come up with a cash flow forecast. Start by keeping track of your monthly income and costs by listing them in a simple spreadsheet. Use the data on this spreadsheet to allocate realistic budgets for each aspect of your business and set financial targets for the next 12 months.When analysing your forecast, make sure you note any seasonal variations in the expenses and income. Also, don’t forget to factor in all fixed and variable costs you might have into your cash flow forecast.

3. Be vigilant with your receivables

Make sure you send out your invoices on time and keep track of your clients’ payment progress. Be quick to follow up on invoices that are nearing their due dates or are already overdue. Also, take note of clients who are constantly late with their payments as this may mean they are about to go under. You need to be prepared for such instances.It would also be beneficial to establish clear payment terms with your suppliers from the start of your business relationship. This way, you can avoid any future misunderstandings and issues.

4. Seek professional assistance

If you’re having difficulty monitoring payments and contacting clients with overdue invoices, it’s best to call in the experts. Our team of professional debt collectors here at Slater Byrne have the right skills and experience to ensure you get paid on time.We will also help assess your credit terms and Terms & Conditions of trade to ensure your business is well protected. This way, you can enjoy higher collection success.

Get in touch with us at 1300 794 290 for a free consultation. You can also check out the Slater Byrne services page to learn more about what we can do for your business.

Slater Byrne will be releasing an article in next month’s Newsletter specifically relating to the process of collecting overdue debt in the construction industry. So, be sure to watch out for that!

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