Good cashflow is the lifeblood of any business. It’s the amount of cash being transferred into and out of a business. Good cashflow is the lifeblood of a business. However even large enterprises are often guilty of missing payment deadlines.
Recently Xero asked 500 Australian companies about late payments*. Their answers exposed just how big an issue cashflow is in industry practices and what’s needed to grow small business and the economy. Here’s what they found.
Nearly 2 in 3 are waiting to be paid
Over 62 percent of small businesses have encountered late or unpaid invoices in the past year. This can have a knock-on effect, with 38 percent saying late payments delayed their own payments to suppliers.
It also affects the larger economy, where small businesses employ nearly half of all Australian workers. Fifteen percent of businesses said late payments meant delaying wages or superannuation for staff.
A tilted playing field
71 percent of businesses said their suppliers’ payment terms were often longer than their own, or they weren’t adhered to, leading to further major problems for business.
Hanging on the brink
Almost 25 percent of small businesses say they wouldn’t have the operating cash flow to survive a month if all the invoices currently owed to them were left unpaid.
Some 62 percent of businesses would not survive more than three months if all invoices went unpaid. Almost 6 percent of businesses say they would last less than a week.
At least half say being paid on time would reduce stress, avoid unnecessary debt and drive business growth.
Learn more here –> https://www.xero.com/au/campaigns/pr/cashflow-gap/
If operating activities do not generate enough cash to stay liquid even profitable companies can fail. This can happen if a company spends too much on capital expenditure or if profits are tied up in an inventory or accounts receivable. It is important to remember that the problem of cash flow issues is not their own but everybody’s. All businesses need buoyant receivables, all the way down to the supply chain.
In the business world, cash is king. That’s why it’s important for all businesses to develop the right strategies to maintain a healthy cash flow. You may anticipate large profits in the next 6 – 12 months but if you don’t have enough cash coming in to cover your expenses, your business risks going into liquidation. The following tips can help:
If you need to chat about how you can reduce your outgoings and increase incomings, why not schedule in a 15 minute chat with me! We can work on increasing and stabilising cashflow.