We’re often asked by small businesses how best to manage their cash. Since we don’t have one ‘silver bullet’ answer to all cashflow problems, we usually end up running people through how we manage our money at iif Chartered Accountants.
What we do may (or may not) work for you and your business, so pick and choose as you like – we’re sure you’ll find something of use.
1. A good accounting system:
Central to good cash management is a good accounting system. You need to know exactly how much GST and tax you’ve got to pay at any one time. It’s easier than you’d think to have this information on hand at any time – get in touch and we’ll talk you through it.
2. Get bills out the door as soon as you can:
Issue your bill as soon as you’ve completed the job. The sooner the bill is sent, the sooner you get paid. While we’re on this topic, you might like to think about providing multiple payment methods. For example, we have a direct debit option for customers. You might like to accept credit card via your mobile phone, a payment gateway on your website, or even through Paypal.
3. Be upfront with pricing to get paid quicker:
If customers know exactly what they’re paying you ahead of time, they’re more likely to pay on time (and not quibble about the bill). That’s why we do nearly everything on a fixed fee basis.
4. Use your business credit card:
It can be hard to manage your cash when large bills come in. This is where a credit card can come in handy…so long as you’re paying it off before any interest is charged (make sure you do – please!).
5. Stress levels correlate directly to cash in the bank:
The chances are that your stress levels go through the roof come the 20th of each month/staff payday/GST payment day if you don’t have the cash sitting there. We have separate bank accounts for each of our major expenses. This enables us to put enough cash to one side to get through each payment day.
In practice, when a customer pays us we first put money into our GST account (using Xero we always know how much we’ve got to pay). From there, we put money into our wages account, and then our rent account. We then pay off the credit card. This means we’ve always got enough put to one side to cover the cash that’s going out. Sure, putting money to one side isn’t as fun as spending it. Call us dull, but we’d much rather lower our stress levels by knowing the cash is there when it’s needed.
So, that’s how we manage our cash at iif Chartered Accountants. Get in touch with Hamish on 04 212 4977 if you’d like us to talk you through it in more detail…it won’t cost you a cent and it will be good for your cashflow!