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The importance of cash flow and how you can manage it post COVID-19

Cash flow is the lifeblood of a small business, and in light of our current global economic crisis, cash flow management is even more critical than ever before. So how can your business focus on cash flow management as restrictions ease and our country begins to reopen? Well, here are 5 top tips on how to actively monitor and manage cash flow within your business. And remember, don’t make any major decisions about software implementations, or credit services without speaking to your bookkeeper first. 

1. Get your accounts in order

It’s never been easier to have clear, organized accounts. There are a plethora of cloud-based accounting software tools out there that are easy to use and easy to set up. It is VITAL to understand how your business is performing, and the only way to do that is to have an overall picture of your business accounts.

So now is the time to get out of the receipts-in-a-shoebox habit, and get yourself organized.

What’s more, a reliable accounting system will help you track and report on key business metrics. Having a good handle on these business metrics will help you manage your cash like a pro – and take advantage of new opportunities.

2. Plan, budget & monitor 

Now that you can see where your accounts lie, it’s time to analyze and monitor your budgets, expenditure and projected earnings. To keep your doors open once we’re all allowed out again means knowing your ‘cash in’ and ‘cash out’, and ensuring the cash-in will be enough to cover all expenses.

Beyond that, managing expenses is critically important. While not spending is ideal for making sure “cash-out” is less than “cash-in” – it’s not really how business works and is not an option for most businesses. So while limiting spend is recommended, there will undoubtedly be times when you need to invest more to guarantee a return.

Although forecasting during uncertain times is difficult, it’s more important than ever to track and predict your business earnings, so you can accurately plan for the future and prioritize spending to achieve your goals (and viability).

3. Collect your debts

While everyone is having to juggle their accounts as supply chains the world over are disrupted, you still need to maintain your invoice terms and ensure your customers know they still need to pay their accounts.

While being direct and fair with your customers or suppliers is the way to go, don’t be afraid to put formal policies in place and take further action if you need to.

There are many ways to ensure your invoices are paid on time, like offering convenient payment options, or discounts for early remittances. Numerous cash advance businesses can take the sting out of long payment terms, and there are payment options for customers that offer pay-by-the-month conveniences. But be sure to understand the costs of providing these services, and know that often, the convenience comes at a price. Talk to your bookkeeper and accountant about different options for your industry and be sure to read the fine print.

4. Be on top of your stock

Stock management is vital for cash flow. The more stock you have, the more money you have tied up just sitting on your shelves. Not enough stock and you risk losing sales while you wait for re-ordering. It’s a delicate balance, but one that is imperative to get right. COVID-19 has created an unusual time for some businesses, and stock that might have flown out the door is now sitting idle on your stockroom floor. But getting back on track should be simple – and it’s the perfect time to implement new systems to make sure you’re on top of your stock in the coming months.

Take inventory regularly and invest in stock management software that can give you real-time access to stock availability. By undertaking regular stock checks and working with your bookkeeper to calculate your inventory turnover ratio, you should be able to manage your stock, so it has a positive impact on your cash flow.

5. Have a financial emergency plan

Cash flow shortages are often difficult to predict, particularly when an unprecedented global economic crisis causes them. But you should always have a plan in place to access additional capital if you need it. Numerous government support packages are currently available, so check with your bookkeeper or accountant to see what assistance you are eligible for.

We can’t predict the future, but we can be prepared by keeping up to date with business trends and having a solid overview of where your business stands. In doing so, you can quickly adapt your business model and carry your success through any more uncertainty 2020 throws our way.

To find out more about managing your cash flow, call Opulent Accountants on 03 8838 8726.

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Moumita Ghosh
Moumita Ghosh
2020-11-18
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We've been meeting Dayan for years now and he is great with his advice and is very knowledgeable and pragmatic. We recently used his services to get the home loan for our house and he and his team went above and beyond to get us the best possible deal. Ishara in his team was super communicative and responsive in following through and made the process very easy for us. Highly recommend them!
Cara Neela
Cara Neela
2020-10-24
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Dayan and Hasi are wonderful, wouldn’t hesitate to recommend them! They went through all with a fine tooth comb to ensure all was correct. Thanks to you both and the Opulent team!
Jason Barry
Jason Barry
2020-09-29
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I was looking for a different accountant and was recommended to Opulent Accountants. I have been blown away with there service. I wish I moved accountant sooner. Platinum Plumbing Enterprises P/L
Afshin Koohestani
Afshin Koohestani
2020-09-10
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Uditha Illeperuma
Uditha Illeperuma
2020-09-08
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Opulent Finance gave professional advice for my unique home loan requirement. They respond quickly with the proper information. The process was smooth and I felt comfortable to deal with the team. The team is friendly and professional to deal with. Highly recommended for any one looking for finance.
Dinesh Fernando
Dinesh Fernando
2020-09-03
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Very happy with the service provided in getting my tax returns done. Mr. Dayan is very helpful and professional and has extensive knowledge in his field of expertise. Highly recommend if you are looking for a hassle free and prompt service.
Ronald Turner
Ronald Turner
2020-07-16
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Opulent were absolutely fantastic to deal with, they are competitively priced and incredibly proactive and friendly. For me I have been much better off using their fantastic services as opposed to doing tax returns myself. Sum was amazing, incredibly knowledgable and super friendly I'll certainly be back with Opulent next year
Milinda Wickramasinghe
Milinda Wickramasinghe
2020-07-05
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Opulent team has been fantastic and it has been truly a pleasure dealing with the team for more than 10 years. Dayan and Ishara have gone above and beyond to assist and communicated with me even when I was overseas. Excellent service has being provided in a professional and timely manner. I would highly recommend the team.
Chami Ranaweera
Chami Ranaweera
2020-04-28
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I have been working with Dayan last 9 years. All of my loans, refinance and tax are done through Opulent.Dayan and his team including Ishara are very helpful and easy to deal.
Edmund Lobo
Edmund Lobo
2019-12-02
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We were new entrants to the cattle farming scene. All the rules and regulations surrounding primary production can be very confusing. The team at Opulent Accountants walked us through all the steps, set up the necessary ABNs and Company / Trust accounts, filed the related pending BAS and Tax returns, and is currently keeping us up-to-date with all ATO related transactions. We recommend them highly to all.