Insights


I’ve talked before about the importance of careful management of cash flow in businesses of any size – but especially SMEs. Here are some more handy hints to help your business keep cash flow under control:

  • Do you enter into supply contracts with your customers which will extend for a period greater than your usual terms?  If so, it’s good cash flow management practice to consider taking an up-front deposit before you start the project.
  • If the value of the goods is less than $5,000 – or even if it’s more – consider receiving payment from your customer’s credit card. That way they get loyalty points, you get the money and the bank takes the risk.
  • The purpose of a credit application is not only to gather details of your potential customer. It should be worded to give you personal guarantees, allow you to take security over real property, provide a release on privacy issues and also to allow you to set out your terms of trade including a Retention Of Title clause. It needs to be signed off and completed properly.
  • OK, so what should you do if you have had the credit application completed, sold your products, the payment terms are great, the goods have been delivered – and then payment doesn’t come. Your next step should be to ensure your credit application is accurate, properly completed and signed. Ensure you have the customer ‘s signed order and receipt of goods and then make the usual verbal and written demands and keep copies of letters and do file notes of payment promises. If these actions have no effect, it is then time to take action through your legal advisor.
  • Debt collection is best taken by someone who is not on your sales team (as they are trying to build good relations and make sales!). There are credit managers who will work a few days a week in your company to handle this particular role.
  • Sales to overseas customers are usually easy. Collecting money after the goods are gone is slow or economically impossible.  The best rule of thumb: get payment before the goods leave Australia, or establish an irrevocable letter of credit from your bank and pass on the cost to your customer.
  • Are you using unremitted PAYG taxation, GST or your staff’s superannuation to fund your business? If so, you may be breaching the law and committing a criminal offence. In addition, Directors are personally liable for PAYG and superannuation that is unpaid and unreported for three months, regardless of whether the ATO issues a Director Penalty Notice. My suggestion is to ensure that all PAYG and Superannuation is lodged on time.

 

Vantage Performance is a leader in sustainable business improvement, winning national recognition in 2008, 2009, 2010, 2011 and 2012.

 

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