How to be a cashflow commando

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description

The GFC might be over, but the cashflow squeeze on Australian SMEs shows no signs of ending. There are plenty of late payers out there and with many small businesses in expansion mode, growth plans are putting extra pressure on cashflow. In this webinar, SME specialist Marc Peskett from accounting firm MPR and SmartCompany editor James Thomson will discuss:• How to keep your cashflow in check• Strategies to keep late payments low• The tools available to help you recover debts• The new cashflow challenges – growth

Transcript of How to be a cashflow commando

Page 1: How to be a cashflow commando

James ThomsonSmartCompany.com.au

Marc PeskettMPR Group

How to be a cashflowcommando

Page 2: How to be a cashflow commando

James ThomsonEditorSmartCompany.com.au

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Marc PeskettPartnerMPR Group

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Poll question

In the last 12 months has your cashflow got better or worse?

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Get the focus right

• Many businesses focus solely on

– revenue

– profits

– decision making based on P&L and Balance Sheet

• Cash flow:

• Keeps you in business

• Increases business value

• To manage you need to measure

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Cashflow KING

•Knowing

– current cash position and your cash to cash cycle.

• Innovating to increase free cash flow

– shorten the length of the cash cycle, improve margins, reduce waste

•Nostradamus

– Seeing problems before they hit

– Understanding the future cash needs of the business

•Growth

– Growth needs cash

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Cash to cash cycle

Production

& Inventory

Cycle

Sales &

Delivery

Cycle

Billing &

Payment Cycle

90

days

30

days

60

days

Cash

PaymentCash

Receipt

180

days

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Measure so you can manage

• Liquidity

• Cashflow budget

• Rolling cashflow forecast

(weekly, monthly, quarterly)

• Actual vs Forecast

• Regular review of aged debtors and payables

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Get on the front foot with customers

• Set payment terms to suit your business

• Communicate your terms up front

• Obtain trade references and conduct a credit check

• Don’t take on clients that can’t pay

• Use COD to test payment capacity

• Have an accurate and efficient billing system

• Offer convenient payment options

• Consistent with sales and customer relationship

policies

• Sack the client

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Handling problems that arise

• Active management of debtors

• Early communication with creditors, ATO, your

bank

• Put payment plans in place

• Daily or weekly assessment of cash flow

management

• Share your problems with advisors, mentors,

friends

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Dealing with problem debtors

• Chase late payers immediately

• Keep regular contact with debtors using

different forms of communication

• Escalate your demands

• Understand the customer before offering

special payment terms

• Withdraw credit or get payment upfront before

accepting further sales

• Use debt collection agencies

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Funding growth – where the

problems arise

• Profit margins are too low

• Long Cash to Cash Cycle

– Investment in Working Capital > Growth in Sales

• Not enough cash left in the business to fund

growth

– Owners lifestyle costs

• Poor investment decisions

• Reactive in seeking funding help

– Seeking funding for prior year growth ?

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Funding Options

• Self funding

• Bank lending

• Equity

• Grants

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www.mprgroup.com.au

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Thank you