During times of economic uncertainty, a tried-and-true method to protect your business is to review to your short-term cash flow forecast.
A reliable and robust forecast which shows the incoming and outgoing cash flows over the next three months (daily or weekly) will help you understand if you can operate within your available cash resources.
Early identification of cash flow problems allows you to take early actions so you can prevent significant issues down the line.
If you identify cash flow concerns, there are a number if steps you can focus on to it back on track:
- Have conversations with customers about the option of early or stage payments. Working with customers to bring forward or staggering payments of invoices so they come once a week, rather than at the end of the month can have an immediate effect on your cash flow.
- Review upcoming expenses, and proritise expenditures essential to your business operations, and decide whether to pause or stop things that aren’t.
- Does your business have a tax arrears? We recommend reaching out to the ATO early to negotiation a payment plan over an extended period. Proactively working with the ATO can provide much-needed relief for your businesses cash flow.
- Review your inventory. It can be a significant element in your capital and should always be reviewed in times of cash pressure. Consider shifting slow-moving or out of date stock through sales or liquidation.
- Speak to your financier to discuss what support is available to you. Can you access an increased draw-down rate on invoice-based facilities, can you get a temporary overdraft extension? Before you approach your financier, have a proposal prepared detailing the funding requirements, how you will repay it.
The current environment is unprecedented, and managing the cash position of your business is likely to require the support of all stakeholders. In our experience, timely, open, and clear communication with stakeholders and a sensible transparent proposal is critical to obtaining support.
Aspen Corp can work with you to develop a robust and realistic cash flow forecast that recognises the crucial differences between the revenue and expenses of your P&L or budget, and the actual cash flowing into and out of your bank account. We can also help you create proposals and negotiate with the ATO, banks and other financial institutions.
