Top 5 tips to keep on top of cash flow
If you own a business or manage a business’s finances, you know that staying on top of cash flow is the key to keeping a business running. This is constant battle for most businesses, especially in a post-Covid world, with many businesses still in recovery mode.
We’ve put together five tips for riding out a cash flow slump to keep your business in the black and ready to go for the future.
Tip 1. Use your credit card strategically
You have probably heard about the “up to 55 day interest free period” your credit card offers. But what exactly does this mean and how do you take advantage? The reason it always says “up to” is because the amount of interest free days available depends on what day of your billing cycle you make the purchase. For examples you would get 55 days interest-free on purchases made on the first day of the billing cycle, 54 on the second day and only 1 day interest free if you made a purchase the day before your statement was issued for that billing period.
To be eligible to receive interest-free days, you also must repay your account’s outstanding balance in full by the due date on your statement.
So how do you know what your billing cycle is so you can take full advantage? Each credit card has different rules but you should be able to find your Statement Period on your Credit Card Statement – each statement period runs for about 30 days and there is then 25 days from when your statement period finishes to the payment due date (hence 55 days).
See below example of a Statement period that runs from the 15th June.
15th June
Statement period begins.
16th June
Make a purchase for 55 days interest free.
30 June
Make another purchase for 40 days interest free.
15th July
Statement period ends.
9 August
Payment due date. Pay closing balance in full.
30 day Statement Period
25 more days to pay
Eligible Purchases
Don’t forget interest free days only apply for eligible purchases made on your card. Exclusions typically apply for government payments (eg. paying the ATO directly) and some other bill payments. To make sure your Interest free period applies to these purchases too, use B2Bpay as the spend will then be classified as “General Spend”.
What if a supplier doesn’t accept credit card payment?
Again, this is where B2Bpay can help. You can use B2Bpay to pay ANY supplier, regardless of whether they accept card payment or not. This is because you pay your bill with credit card using B2Bpay, and we transfer the payment by EFT to your supplier. This means that you can turn every bill into one that maximises your cash flow.
The take aways?
- Take a look at your credit card statement and get to know your ‘Statement Period’
- Mark your statement periods and payment due dates (25 days after your Statement period) in your diary
- Use your 55-day Interest-free period to your advantage eg. by making large payments on day 1 of your Statement Period.
- Use B2Bpay so you can make ANY payment with credit card, and ensure all payments are ‘eligible’ for the interest-free period. You can also schedule payments with B2Bpay, so schedule payment dates as close to day 1 of your statement period as possible.
Tip 2. Cut Costs
This is a good one to focus on if your business has needed to slow down or shut down during lockdowns. It gives you a chance to take stock of anything you have been paying for that you don’t need.
For example, are you spending money on subscriptions or services you are no longer using? Or do you have insurances you no longer need? Can you renegotiate the terms of outstanding loans or leases? Are you monitoring stock levels at efficient levels? Take a good hard look at a few month’s expenses for your business. Print it out if you can so you can analyse and tick each item off. Look for anything you could cut out or renegotiate. This is something that takes time and brain power that you often don’t have the capacity for when you are knee deep in your everyday business activities. But if you take the time out to take stock and complete this admin task, you could be saving serious dollars over the long run.
Tip 3. Ask for payment extensions
To stay cash flow positive means you need to keep cash coming in as quick as possible, while holding back on expenses for as long as possible.
One way you can do this is to work closely and build strong trusting relationships with suppliers who can offer flexible payment terms. That way you can negotiate and maximise payment terms when you need to.
If a payment is due in 30 days, see if you can extend it to 45 and don’t pay any earlier. And if you’re paying by card, time payment early in your Statement Period to provide you an extra 55 days interest free on the payment (see tip 1). Just remember to not leave it to the last minute to request an extension on payment. Make sure you are always looking ahead at upcoming bills.
Tip 4. Talk to your bank
The Government’s SME Recovery Loan Scheme is designed to support Australia’s economic recovery, by allowing eligible businesses to access finance as JobKeeper is now phased out.
This scheme is designed to help small to medium sized enterprises (SMEs) get access to cheaper funding, with the government guaranteeing 80% of eligible business loans.
Most bank lenders and many non-bank lenders are taking part and are also offering repayment holidays for up to 24 months as part of the scheme. Loans include term loans, overdrafts, working capital facilities, leases and hire purchase agreements. Different criteria will apply depending on the individual business and the lender. Get in touch with lenders to find out what options they have to suit your business cash flow and situation.
Tip 5. Get your invoices paid faster
We will say it again. Keeping on top of cash flow is all about ensuring you keep cash coming in as quick as possible.
Some ways you can do this is to always make sure you send invoices as soon as the work’s completed or products are delivered. Use invoicing software to ensure it is easy to do this by sending out templated invoices on the go. And don’t let restrictive payment methods stop your cash flow! By accepting all major credit and debit cards as payment options allows your customers to manage their cash flow options too and pay you online 24/7.
You can sign up to B2Bpay to accept card payments on your invoices at no cost to you! Click here to get started today.
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