Dynamic Business Expert Panel: Credit

The Dynamic Business panel of leading Australian business experts share their advice on how SME owners can survive in the face of a tight credit market.

MATTHEW NOLAN, MD, PROVIDENT CASHFLOW

With additional working capital harder to secure, it’s crucial to get every dollar in your business working harder. Use these tips to squeeze the most cash out of your business cash flow:

Take Credit: Be sure to take full advantage of creditor payment terms and remember to regularly negotiate extensions to these terms whenever possible. Also insist on paying money electronically, as this means you’ll be able to leave payments to the last possible day and you’ll also have a record that confirms payment has been made.

Get paid: Be sure to invoice your customers promptly and with a fully detailed invoice, which is followed up regularly to ensure payments are received on time. 
Prioritise: Keep an up-to-date cash flow that includes pending payments and expected sources of income. By listing and then scheduling payments and receipt of income, it will identify cashflow requirements and help ensure there are available funds to meet commitments. It will also help prioritise payments so that the most important ones are paid first, as well as preventing spontaneous spending on non-essential items when payments are received.

Call: If things are looking particularly grim and payments need to be stretched beyond the due date, minimise the risk of an unpaid creditor cutting off supply by pro-actively contacting them. Through letting suppliers know that you haven’t forgotten about paying, they’ll be more inclined to believe the commitment will be honoured and encouraged to provide you with a little extra time.

MARY HENDERSON, CEO, GEEKIT GROUP

I am a great believer that success should not be measured by how busy you are and the amount of new business coming through the door. Success is only achieved when the money is in the bank. When the economy is slowing and access to money is tight, it’s vital to put in place effective cash flow management practices to ensure you have a clear understanding of the money coming in and going out of your business.

Firstly, I cannot stress enough the importance of effectively managing your cash flow with regular report updates, such as aged debtors and cash flow reports and budget comparisons. These reports aren’t difficult to produce and show what monies are owed, who are the better paying customers and how much cash you have on hand. Ultimately, they enable you to assess your business’ performance, plan ahead for growth and take immediate action to address problems.

I am also a great believer in negotiating flat fees for external consultants such as accountants and lawyers so I know, up front, what my costs will be and won’t be stung by over-and-above hourly fees. For example, legal fees often exceed original estimates, so I always ask for a lump sum cost up front and factor that into my budget.

Finally, resist spending on unnecessary gadgets. Instead, invest in your people and technologies so you can deliver high quality work for customers, which at the end of the day will help you to thrive and prosper in slower times.