Cash Flow Management

Discover how tech rentals offer the perfect solution for managing your cash flow

What is cash flow management?

Every business has bills to be paid on one side, and money coming in on the other. Managing cash flow and working capital is the process of ensuring you have enough cash available to meet expenses you can’t delay – such as wages or utilities – and balancing incoming invoices against your future expenses. 

Effective cash flow management helps keep your creditors and suppliers happy, your spending under control, and allows your business to avoid unnecessary debt. It also comes with improved liquidity and reduced stress too! But it requires a well thought-out strategy to implement. 

One of the first things your business should consider about its cash flow management strategy is whether it has a lot of unused assets sitting around. These can be sold for cash, and equipment can be rented instead, as needed. Hire Intelligence Australia is perfectly positioned to provide organisations and businesses of all sizes with reliable tech rentals at predictable monthly fees. From laptops and desktops to tablets and printers, we have got you covered, whether you need your tech for a large company or a home office! 

Read on to learn more about cash flow management, and how tech rentals can improve your business’s cash flow situation.

Why cash flow management is more important now than ever

Many businesses are under significant financial stress at the moment, and managing cash flow is crucial. Financing and liquidity cash flow play an important role in any business continuity plan.   

When cash is tight, all strategies to mitigate and budget more effectively should be on the table. Effective cash management not only keeps your business in good standing with your creditors and out of debt, it also means any remaining profit can be reinvested in the growth of your business. Poor cash flow management and a lack of cash flow control, on the other hand, can mean wasted opportunities and even bankruptcy. 

Steps for better cash flow management

Here are some tried and tested tips on how to manage cash flow effectively.

 

1. Make cash flow projection a habit: Cash flow projection allows you to glimpse your financial future and plan accordingly. 
2. Investigate cash flow management solutions: while small business cash flow management can be done without dedicated software, there are lots of affordable and even free solutions out there that might be worth exploring.  
3. Revisit how you invoice: Good cash flow management starts with good invoicing! 
   1. Experiment with sending invoices straight away (in the case of project work) rather than at the end of the month. 
   2. Make sure your invoices are simple to understand, easy to read, and clearly show your payment terms. 
   3. Look at offering discounts for early payment, or charging late fees on overdue accounts. 
4. Negotiate with suppliers:  One of the easiest ways to improve cash flow is simply to chat with your long-term suppliers and ask for a discount or more favourable payment terms. The worst that can happen, after all, is that they say no!  
5. Rent instead of buying: Big cash outlays can have a massive impact on business liquidity and company cash flow. Swapping large single expenses with smaller, predictable monthly fees can dramatically improve cash flow management. Hire Intelligence Australia can help you switch your IT infrastructure to a more flexible and cashflow-friendly rental model.  
6. Sell off obsolete or unused assets: One of the fastest ways to boost company liquidity is to turn assets you don’t use into cash you can. 
7. Lean down your inventory: A surprising number of small business cash flow problems stem from poor inventory management. Do a thorough stock check, find out what doesn’t sell so you know not to order more of it, and sell off items which are simply gathering dust at a discount.
8. Ask for deposits on large projects: It can be very challenging to figure out how to control cash flow when you have upfront costs before you can start work on a large project. Asking for a deposit is a simple way to offset this. 
9. Keep a cash reserve outside of your normal bank account: Ask your business financial adviser about ways you can keep a separate investment account which earns a higher interest rate as a buffer against times of particularly poor cash flow.
10. Investigate cashflow finance: Each company’s cash flow is unique, and sometimes the nature of your business means incoming and outgoing money just don’t align well. Highly seasonal operators are a prime example – when you receive large payments over a short period, but then have normal expenses throughout the year. In these instances, professional cash flow support may be an excellent option. 

How tech rentals can help with cash flow management

When looking at how to manage cash flow in business, the way in which you finance resources and equipment is vitally important. It’s crucial to understand the liquidity and cash flow implications of renting versus buying.

Renting equipment has a number of well-established benefits for business cash flow. These include:

• Fixed, predictable costs which make budgeting easier
• Capital preservation
• Fully tax deductible 
• Cash savings in terms of depreciation, storage, and maintenance 

In addition, idle equipment can be sold to improve your cash balance, and you can rent just what you need and actually use. This is a solid approach to better cash flow management.  

Of course, not all equipment can or should be rented, but IT & AV hire is the perfect example. Because technical equipment and devices tend to become obsolete faster than mechanical equipment, purchasing them upfront doesn’t make a huge amount of sense. 

In addition, renting your workstations, servers and communications equipment means you have IT support and maintenance all built into your monthly payment. Plus, you can upgrade to a newer model at the end of your rental period if you wish.

Get in touch today if you’d like to learn more about our tech rental solutions, or read our FAQ below for more tips on how to manage company cash flow.   

FAQs of Cash Flow Management

My business has been impacted by the coronavirus outbreak – what are some cash flow management tips I can use?

The coronavirus crisis has created a major cash flow problem for many businesses, both large and small. One of the best ways to deal with a sudden decrease in revenue is to improve your quick ratio. Sometimes called your acid test ratio, this basically means the amount of liquid assets you have over your current liabilities. 

How to improve the quick ratio of a company:

• Sell off any capital assets that aren’t generating revenue for the business 
• Invoice sooner to speed up payments
• Offer incentives for customers to pay early
• Rent equipment like laptops, touch screens and tablets rather than purchasing them 
• Cut your overheads  
• Join forces with other small business owners to increase your buying power

The more you can improve your quick ratio, the easier your cash flow management will become. 

What are some non-essential costs I can cut in my business?

While every business is different, good cash flow management always starts with the fundamentals – like limiting unnecessary expenses. A good starting point is to sit down with several months’ bank statements, and draw up a comprehensive list of your regular expenses. Now compare each of those with the revenue you expect they bring in. Once you know which costs yield results and which don’t, you know exactly where to start cutting!

Also, never pay for expensive equipment outright before you’ve investigated rental rates. This is especially true for assets which need to be upgraded on a regular basis, such as your IT infrastructure. Before you buy, factor in the cost of replacing the item once it’s become obsolete. In many cases, especially with devices like smartphones and Apple products, purchasing these items just doesn’t make financial sense in the long run.    

How can I improve and incentivize my debtor collections?

Firstly, make sure your customers know when their accounts are due! When bringing a new client on board, make sure you discuss your payment terms up front. You can also offer discounts for advance payments, and give your customers a variety of payment options to choose from. Some may prefer to use their business credit card for instance, while others might prefer an online payment platform.  

Why is prolonging payments important for cashflow?

By increasing the gap between when you get paid by clients, and when you need to pay your suppliers, you can quickly develop a positive cash flow. Not only does this mean you have more capital at your disposal to grow your business, it also takes a lot of stress off you come month end!  

Should I take out loans to help with my cash flow management?

While getting into debt to get out of debt might sound counterintuitive, swapping short-term debt for long-term debt at a lower interest rate can actually be very helpful when dealing with cash flow issues. Speak to your business financial planner about the products available to you. 

Why is cash flow forecasting important for SMEs during the coronavirus outbreak?

We live in uncertain times, so any tools which help you glimpse the future are extremely valuable! Cash flow forecasting can help you do just that. 

If I have cash flow problems, how can I fix them?

Aside from the measures we’ve discussed above, there’s another big aspect to consider. Is it time to re-evaluate your pricing? If you haven’t raised your prices for fear of driving customers away, do some digging and see what your competitors are charging. You might be able to raise your prices and still remain competitive.

If your cash flow issues have become severe, it may be an idea to start looking at selling off old assets – especially those you don’t use regularly – and looking at renting your assets instead.  

What is the best way to track my business’s cash flow?

Learning how to perform cash flow analysis is the best tool at your disposal for tracking cash flow. 

How should I approach my supply chain during this period?

Remember that you’re almost certainly not the only business experiencing a

cash shortage at the moment! Supply and demand have shifted momentously during the coronavirus crisis, catching many businesses off guard. Try and use this experience to identify issues and build a stronger and more resilient supply chain for the future.  

Contact us today and let’s discuss how our tech rentals can help your cash flow situation today!