Have you heard about cashflow forecasting?

Have you comColourful building block graphe 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

Account Overdue Friendly Reminder Sticker



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.

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

Coins bills

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.

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.

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.


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.