Improve Cashflow with Flow Software

 

My favourite thing about Flow is that it doesn’t mess around. No need for studying accounting books or endlessly Googling how to read your financial reports.

It’s a daily cash management tool for small business. It pulls your hidden, critical information out of your accounting software and brings it right out into the light of day.

It’s great if you’re feeling overwhelm and just need the simple facts so you can get stuck in.

From the Futrli website, some of the ways Flow can help the small business owner:

• Quickly identifies hidden poor payers
• Calculates the right time to pay bills
• Helps you understand how to make the right decisions to keep more of your cash in your account

An example of how Flow communicates with you:

And this:

Once you connect Flow to Xero they sync on average every 12 hours – giving you up to date information to work with. Because your software is integrated, as you’re scrolling through your posts in Flow, you can click on those posts and you’ll be taken over to Xero to look at the actual Invoices and Bills that Flow is referring to (with the Pro version).

I recommend pinning posts in Flow so that you can go straight to the information that’s important to you if you are short on time.

Soon Flow will also integrate with Slack and Gmail.

Getting on top of your debtors and creditors is one of the easiest ways to improve cashflow. I think we tend to just accept things how they are though and honestly we don’t realise how much of a difference working on these key areas of our business can help turn our business around. Whether it’s in a time of urgent need to stay afloat (like a lot of small businesses are experiencing right now) or during those times when our business is looking strong and we’re wanting to spend some money and take it up a level.

Flow is very easy on the budget and easy to use. There’s a free version with the basics and the Pro version with some nice extra features that are worth the small monthly subscription.

Happy bookkeeping…

                                              Sarina

 

Interested in more great software that integrates with Xero? Try reading:

• 10 Tips for Reconciling with Smokeball Software
• Timely Software – A Salon Owner’s Perspective
• Cliniko + Xero
• Which scheduling software?

3 Simple Tips to Improve Cashflow

I think I’ve read almost every small business finance book in the Tea Tree Gully library here in Adelaide – some of them twice.

I’ve found 3 great tips that I’ll be incorporating into my business.  They are not only an easy way to help increase cashflow but will also help tweak your mindset if you find your confidence flagging.

This is from Accounting for the Numberphobic by Dawn Fotopulos.

Dawn writes:

“Invoices become a running record of the value the business delivered for every client – a testimony of what’s been accomplished.  Listing the benefits the client received is the key to differentiating your product or service from others.  It will remind the client of what makes the business you manage different and more professional than that of your peers”.

She goes on to write “Invoices help to build the reputation of the business”.

Have you ever considered the effect your invoice has on your client when they receive it? Is it possible they look at your invoice and think “How did he get to that price? What exactly did they do in that 8 hours they have charged me for?”

If you’ve poured your heart and soul into providing a great product or service for a client – don’t risk your invoice getting put on the backburner whilst your client pays everyone else before you.  Remind your client of the value you have provided so that paying you is that much easier and they have a great reason to use your business again in the future.

So these are my 3 tips for improving cashflow & boosting business confidence:

1. Include a detailed description on your Invoice of the service or product you’ve provided and remind them of the value you’ve added for them. Be confident in your invoicing!
2. If some of the work was complimentary and isn’t being on-charged to the client – include that on the invoice so the client is aware.
3. If 2 or 3 people have performed the work for the client – include their names to give more meaning to the work.

I’ll definitely be incorporating this into my own Xero invoicing for Festival Bookkeeping – it will only take an extra 5 minutes.  Such simple concepts and easily implemented. Love it.

 Looking for more small business tips? Here are some others that readers have liked:

• Save Time & Remove Doubt with your Bookkeeping
• Tip for Small Business – Better Cashflow # 1
•  Tip for Small Business – Better Cashflow # 2
• 14 Cashflow Tips for Small Business

 

Happy bookkeeping…

Tip for Small Business – Better Cashflow # 2

 

 

 

 

You may have read my previous tip on improving cashflow in your small business, found here Better Cashflow # 1. I have another idea you can easily implement in your small business to help boost your bank account and have more money available when you need it.

It revolves around the following fact:

The sooner you contact an overdue customer, the more likely you are to get paid.

So improve your chances of being paid on time by having a collections policy.

A collections policy is basically deciding on the steps you are going to take when a customer hasn’t paid their invoice by the due date and putting those steps in writing.

For example:

• Invoice 1 week overdue. Send a friendly reminder by email
• Invoice 2 weeks overdue. Phone the customer. Discuss why overdue.
• Invoice 3 weeks overdue. Phone the customer. Discuss payment plan if needed.

You can still be flexible and use your judgement on a case by case basis. But overall you will lay down the framework for what action to take and when. You set aside time on a regular basis to sit down and work through outstanding invoices – you make it a priority.

An important part of your collections policy is to keep track of who you have contacted and when. This helps whether you have an in-house bookkeeper, outsource your bookkeeping or whether you are responsible for your own business accounts.

You will find that over time your customers will start to pay you sooner. If they need to decide what invoices get paid this week, you are more likely to be at the top of their list.

You are not being rude by following up outstanding invoices – you are simply a business owner running your business in a professional manner.

You can find more helpful tips on customer invoicing in Keeping on top of customer payments and also 14 Cashflow Tips for Small Business

Have you run a report lately to see how much your customers owe you and how overdue those invoices are? How much more cash would be in your bank account helping to cover your own expenses if those customer had paid on time?

 

Tip for Small Business – Better Cashflow # 1

Do you put money aside regularly to help cover your tax obligations?

Businesses in Australia that are registered for GST are required to regularly submit Business Activity Statements. This could be monthly, quarterly or annually. (If you are paying a contract bookkeeper to do this, they must be a registered BAS Agent).

If having to come up with money to cover your ATO obligations is causing you stress why don’t you review amounts owing more regularly and put them aside into another account? This idea works equally well for larger businesses or sole-traders and freelancers.

Steps:

1. GST – generate GST report for the past month. Subtract GST paid amount from GST collected amount. This is what you owe the ATO.
2. PAYG withholding – generate payroll reports for the previous month to find out how much you withheld from employee pays.
3. PAYG instalments & fringe benefits tax – check previous BAS to see what instalment amounts are going to be due with your next BAS.
4. Transfer the total amount from steps 1-3 into another bank account.
5. Repeat on a regular basis eg monthly.

Not only do you have the money sitting there available to pay your BAS liability when it falls due, but you can also pay your other expenses with confidence knowing that your tax obligations are taken care of. So easier business decisions, less stress and improved cashflow overall.

I have other ways to improve cashflow that you can implement into your small business and will post these soon. In the meantime, you could check out my post from a couple of years ago 14 Cashflow Tips for Small Business  and also Have you heard about cashflow forecasting?

Do you put aside money regularly to meet your tax obligations?

3 ways a budget can help your business

Maybe you are a small business owner or freelancer and you feel that you don’t really have control over your finances. You are just focusing on doing your thing and money is coming in and going out.

It could be that you are aware that big businesses use budgets, however you are unsure if it’s something you should be doing in your business.

Here are some reasons I think budgets could help your business.

Goal setting
We are all aware of the benefits of setting and working towards goals in our personal life.We set goals so that we don’t float aimlessly through life, so that we can stay focused and for the increased confidence and motivation that comes from achieving our goals. Think of budgets as an integral part of the goal setting process of your business.

Stay in control of expenditure
Preparing a budget makes you stop and look at where your money has gone in the past and enables you to prioritise where your hard earned money goes in the future.

Obtain finance
Show the banks that you take your finances seriously. Having a budget to present to potential lenders or investors demonstrates that you are planning for business success and that you are in control of your finances.

Budgeting can be as simple or as complex as you want to make it. I do the bookkeeping for a not-for-profit organisation that has many cost centres, and the budget was a bit daunting to deal with in the beginning.  The more exposure you have to budgeting though, the easier it gets.

A good idea is to start simple and add to it as you gain confidence. The important thing is to do it in the first place and to keep doing it on a regular basis.

Do you prepare budgets for your business or in your workplace? Has the above list inspired you to look into preparing a budget for your business? Love to hear from you.

Credit Applications in 5 Steps

Surely no one enjoys chasing customers that are late in paying their bills?

Don’t extend credit to your customers until you have done a background check – follow these steps and watch your cashflow improve, whilst spending less time chasing customers for payment.

1. Type up a Credit Application template for customers to complete & return.

Include spaces for:

• Customer Business Name
• ABN / ACN
• Directors/Owners Names
• How long trading?
• Preferred invoice & statement method: Email / Fax / Post.
• Preferred contact name & email address for invoices & statements.
• 3 x Trade References – Business name, email, phone number.

You may wish to include:
“By submitting this application, you authorise (insert your business name) to make inquiries into the business/trade references that you have supplied.”

Lastly, a place for their name, signature, position and date.

2. Once Credit Application completed and returned, contact all referees and ask:

• How long have they been trading with you?
• Do they pay you on time?
• What are your payment terms?
• What is their monthly spend?

3. If you are comfortable with the response from all 3 referees, go ahead and extend credit to your customer. If the customer has not been in business long consider cash on delivery terms, a low credit limit or 7 days terms until a solid relationship has been established.

4. Inform your customer in writing whether their Credit Application has been accepted, clearly outlining your payment terms.

5. Update your accounting records and file Credit Application away.

If you would like to read further tips on dealing with slow paying customers, refer to my previous post Keeping on top of customer payments. For other tips on improving cashflow, click on the link to 14 Cashflow Tips for Small Business.

Do you do use Credit Applications in your business or workplace? Is it something you can see yourself incorporating into your business procedures?

Not for Profits – 6 ways your bookkeeping differs from other organisations

There are many types of organisations out there (one of the reasons I enjoy bookkeeping), and not-for-profits are one type of organisation in particular that require a special approach to their bookkeeping.

• Terminology – Terms such as “profit” and “loss” are usually replaced with “surplus” or “deficit”.

• Complex budgets – Broken down into many different departments or auxiliaries. Essential for decision-making and helps keep organisational spending on track.

• Asset purchase – Often recorded as an expense, with adjustments made at the end of the financial year to transfer the amounts to the correct asset accounts.

• Special tax concessions – Available for some registered charities in Australia. For example, income tax exemption.

• Cash handling – A lot of trust put in volunteers, who may be handling large amounts of cash. Do you have good internal control procedures in place to reduce the risk of theft and lost money? For some tips on internal controls, refer to my previous tips in Reducing the risk of fraud and error in small business.

• Non-Profit Sub-Entities – Treated separately to the rest of the organisation in relation to GST.

Who said bookkeeping is boring? Always something new to learn, particularly if you are a newly appointed Treasurer or Bookkeeper.

Have I missed something important that you have found to be different with not-for-profits? Please join the conversation and add your comments below.

Have you heard about cashflow forecasting?

Have you come across the term cashflow forecasting whilst skimming through business material? Maybe you have heard about it and thought to yourself that it’s pretty important but I don’t have time to look into it now?

Typically, a cashflow forecast shows your bank balance at the beginning of the period, the money you expect to come in, the money you expect to go out and then your final bank balance at the end of the period.

It gives you a chance to see periods in the year ahead where cash may be tight and periods where you may have extra cash on hand. Instead of flying by the seat of your pants, you can make more informed decisions about when to make your more expensive purchases or when you may need to look for additional finance.

For example – maybe you have kept an eye on your Profit & Loss Statement and your business is making a profit, however you don’t seem to have much cash on hand to pay your bills. You may have been spending money on capital items, have had to pay GST owed to the ATO or have large amounts of outstanding customer invoices – these transactions aren’t reported on your Profit & Loss Statement and are easily overlooked when trying to figure out where your money is going!

Reckon and MYOB both have cashflow forecasting tools. Otherwise a spreadsheet will also do the job. If you have been in business for a while you can use figures from the previous year and build on those.

If you would like to read more cashflow tips, click on the link to my previous article 14 Cashflow tips for small business.

Do you use some form of cashflow forecasting in your business – maybe the MYOB or Reckon tools? What do you think of them – I’d love to hear your thoughts.

Keeping on top of customer payments

 

 

In my recent post “14 Cashflow Tips for Small Business” I briefly discussed methods of customer management that can help improve business cashflow.  Extending credit to customers is the norm in many industries and may be necessary in order to take your sales to the next level. Inevitably, you may have to write off some bad debts.  However, there are ways of protecting yourself from slow paying or non-paying customers.   Be smart, reduce stress and keep on top of your cashflow situation with the following debt collection procedures.

Open communication
A friendly phone call or email once terms have been exceeded by 5 to 7 days may be all it takes in order to get paid. They may have misplaced your invoice, overlooked it or didn’t know your terms of payment.  Query if there is a problem, and ask them when you can expect payment.

Be respectful of their situation and encourage open communication.  For emails, have a simple template that you can copy and paste each time.

Written records
Every time you follow up late payment, keep a written record of it. Include the date followed up, who you spoke to and when you can expect payment so you have a date to work with for follow-up.

Payment plans
If a customer is having genuine difficulty in paying then offer them a plan to pay the money back over several weeks or months. Once you have agreed on the terms, ensure you send a confirmation through in writing.

Invoice details
I am surprised at the number of invoices suppliers send through with no payment terms written anywhere on the invoice.  Such a simple thing! Make sure you include the title “Tax Invoice” (important for GST purposes), the invoice date, terms of payment, your business details, the customer’s business details, your ABN and your banking details as well as the product/service details.

Having the due date clearly written will also help.  Take the time to set up your invoices in a clear, consistent and professional manner.

Reports
Schedule in a fortnightly or monthly review of your ageing summary report.  Print it out, highlight overdue payments and use it as a starting point to follow up late payments.  Keep your old reports so you can look back to see any patterns that are developing, and see the progress that you have made in your debt collection endeavours.

Monthly statements
Another simple procedure that works.  Email or post your statements out promptly after the end of month.  Use “overdue” or “friendly reminder” stamps where necessary.

Cashflow is so important for the survival of small business.  Make the decision to take debt collection seriously, get your policies down in writing and follow through consistently.  Happy bookkeeping!

14 Cashflow Tips for Small Business

SUPPLIER MANAGEMENT
1.    Credit terms
Pay suppliers on time (not early or late) and ask for credit terms once you are up and running – essentially giving your business an interest free loan.

2.    Review suppliers regularly
Check to see if you are getting the best deal and ask for discounts for early payment or bulk orders.

3.    Late payments
If you need to pay late, communicate with the supplier early and set up an agreed payment plan. Get the plan in writing.

CUSTOMER MANAGEMENT
4.    Payment terms
Make payment terms clear to new customers before you process their order – and put this in writing.

5.    Invoice design
Include all your banking details on your invoices and ensure payment terms are clear.

6.    Credit checks
Do a credit check on all new customers.

7.    Deposits and progressive payments
For larger jobs ask for deposits upfront and progressive payments at various stages of the job to keep cash coming in and reduce the risk of not getting paid for work performed.

8.    Non-paying customers
Offer a payment plan to clear the debt – some cash coming in is better than not being paid at all.
9.    Invoice early
Send the invoice as soon as the job is done.

10.    Ageing debtor reports
Review your ageing debtor report to identify slow paying customers and to identify potential problems before they get out of hand.

11.    Friendly reminders
Phone or email early if payment terms have been exceeded. If they are late payers with all their suppliers, it shouldn’t be long before they decide it is easier to pay you first.

INVENTORY MANAGEMENT
12.    Profit margin
Identify which items make you the most profit and focus your time and money on those products.

13.    Stock turnaround
List all slow moving and obsolete stock and work out a plan to move this stock as quickly as possible. Use this cash to buy stock that sells faster.

CASHFLOW FORECASTING

14.    Find a simple cashflow forecast template and use it.  It will help to identify times where more money is leaving the business than is coming in.