With insolvency rates for small to medium companies on the rise since October last year, it is more important than ever to carefully manage your company’s cash flows.
There are many different reasonswhy companies struggle to meet their financial obligations. Common reasons include unfavourable economic conditions, weak industry sectors and losses from high-risk investments. While these circumstances may be out of your control, there are other strategies that company managers can proactively implement to avoid their business facing insolvency.
Insolvency Services Australia provides their six top tips to help you manage your money and avoid insolvency:
Regularly prepare cash flow forecasts in your business plan and stick to them.Periodically monitor your actual spending against the budgeted amount and adjust accordingly. If you are spending too much over the forecasted numbers, it’s time to be stricter with your business spending.
- Impose strict credit control and debt collection procedures for your customers. Your company should invoice your customers regularly and on time, in order to avoid delayed payments. You could also offer benefits to those who pay their accounts early. If your customers are consistently late, chase them up and if necessary put them on stop supply until they clear their arrears.
- Maintain adequate capital reserves for foreseen and unforeseen tougher financial times. This can mean ensuring appropriate access to cash reserves, as well as ensuring access to borrowings if needed.
- Conduct a regular review on businesscosts and if you find any unnecessary costs, eliminate them.
- If your company is struggling to pay its creditors, contact them as soon as possible to negotiate a payment plan you can stick to. Early notification and honesty are likely to lead to a more positive reception.
- Take a look at your overhead costs to see if there are any cuts you can make to save money. One way to reduce spending money is leasing equipment instead of purchasing it. Another way is to consider relocating to a more affordable location or sub-letting part of your business premises if you have any unoccupied space.
Getting professional advice from a registeredinsolvency practitioner is critical. Getting advice from a person who is not an expert could put you in a worse situation. At Insolvency Services Australia, we have a fully qualified insolvency practitioner on site that can provide consultation and expert advice about your company’s solvency.
We are available 7 days a week, so call when it is convenient to you. For more information, contact ISA today at 1800 003 883.