Wendy Smith, Western Cape leader of BPaaS and Accounting & Financial Advisory at Deloitte, says, “If you are applying for funding, getting your business cash flow positive will go a long way in ensuring the success of your application. If you plan to expand, merge or sell your company, a positive cash flow will make it easier to attract a quality business partner or purchaser.
“Taking charge of your finances keeps you operational and puts you in a position to face unforeseen contingencies. Positive cash flow ensures that creditors can be paid timeously, which is good for your credit rating and will potentially open doors in terms of getting a loan, a line of credit, or funding in the future.
“While cash flow challenges are common for most businesses, there are three key measures to implement that will allow you to take charge of your business finances and, ultimately, your cash flow.”
“Accurately tracking your cash flow means you can make informed decisions when it comes to stock management and helps you to manage the timing of monthly payments such as rental, salaries, and suppliers or creditors. It also means you can plan for ad hoc, but necessary, expenses such as maintenance, marketing, promotions etc.”
A cash flow statement consists of three categories:
“Late payments wreak havoc with your cash flow situation and have a snowball effect on inventory and operating expenses. Once you make a sale, your business incurs a number of costs. So if you don't collect the money owed you're actually worse off than if you had never made the sale in the first place.”
“Discuss invoicing and payment terms clearly and early on with customers, collecting what is owed timeously, as well as setting up customer contracts that require pre-payments to enhance cash flow. Business owners should consider incentivising customers to pay on time.”
“Time your payments to suppliers with your cash flow requirements in mind by balancing the cost of financing with the benefits of extended payment terms. Always ensure that your payment terms to suppliers are in line with, or better than, the terms you provide to your customers,” concludes Smith.
To apply to the Western Cape Funding Fair, visit www.westerncapefundingfair.co.za.