How to create better cashflow when your
business is growing.
I
f you’re in the happy position of seeing
own realistic personal budget so that you
Consider using a financing mechanism to
your business in a growth phase, it pays
can draw a set budgeted amount from the
fund your debtors. Consider leasing fixed
assets instead of purchasing them. Monitor
to consider how you can most effectively
business. Plan for income tax payments and
manage your in-comings and out-goings.
at the very least have annual accounts and
and reduce overheads as much as possible.
In a time of growth, cash is required to
tax positions completed as soon as possible
Consider subcontracting rather than
pay suppliers but it may not be replaced
after balance date.
employing where appropriate.
Carefully decide how to bring cash into
the business
Align your bank accounts
Introduce an appropriate level of cash
account where PAYE, GST and Income tax
into the business by way of capital or
(expressed as a percentage of sales) are
for some months until a sale is converted
into cash. The level of Stock and Debtors
will increase until these reach the optimal
level for the business size and that requires
an increase in the level of cash to support
this growth. Funding is also needed to
pay overheads, tax obligations and capital
investment. Inadequate planning and
management during this phase is one reason
such a high percentage of new businesses
Owner advances.
Meet further funding
requirements with an optimal mix of short
For more information, please contact:
Monitor sales and stock
To avoid this cash trap, here are some key
Monitor Gross margins on your sales. Have as
tips to consider.
many Cash Sales as possible. Ensure careful
stock management so as not to overstock.
It should limit liability but allow for the
appropriate level of capital input from
shareholders or partners and it should
accommodate borrowing from both owners
and external financial organisations.
regularly transferred. This will ensure funds
are available on due dates.
and long term debt.
fail in their first year.
Choose the right business structure
Consider maintaining a separate bank
Brent Cheyne
tel
(03) 548 2139
email
Brent.Cheyne@crowehorwath.co.nz
Use Consignment stock where possible. Have
good systems so that all stock and sales are
accounted for.
Keep control of debt and overheads
Negotiate better discounts and more
favourable payment terms with your
Plan and budget
Create an up to date business plan that
includes a Cash flow budget. Compare
actuals to budget and regularly update
the budget to meet reality. Prepare your
suppliers, where possible, including the
possibility of instalment arrangements.
Have a strict Customer Credit policy in
place and administer this efficiently. Charge
interest on overdue accounts. Stop Credit
where necessary.
Need helping managing growth?
Call us for trusted, practical advice
Tel 03 548 2139
www.commerce.org.nz
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