By Zilla Efrat 

Market conditions remain uncertain as we enter 2024 which means it’s crucial to stay on top of your business’s finances. Here are 10 tips on how to do this. 

1. Boost your cash flow

Improving your cash flow can free up money to fund growth, ensure you can pay your bills and reduce debt.  

Preparing regular cash flow forecasts is the first step. This is done by estimating what your income and expenses will be at different periods over the year. Identify times when you may have cash flow shortfalls so that you can plan for them and smooth out cash flow fluctuations. 

According to CPA Australia, you should also follow up on late and outstanding payments from customers and make full use of your suppliers’ payment terms. You could also prioritise your marketing plan to focus on products and services that can be turned into cash quickly and reduce stock levels by replacing slow-moving or obsolete stock with high turnover stock. Consider using a factoring company if you have a lot of invoices to chase. 

2. Pull in your belt

Your cash flow and profitability will suffer if you can’t bring your costs under control. According to MYOB, the best starting place is to consider your key cost centres, such as purchasing, sales, finance and administration. Then rank your expenses from highest to lowest, looking for potential cost savings in each category. 

MYOB cautions that costs aren’t always easy to spot in business, but they can add up quickly. Hidden costs could include rising insurance premiums as well as unused subscriptions and industry memberships. 

Strategies to cut costs may include outsourcing to save on wages, looking for cheaper suppliers or renegotiating better prices with suppliers. 

You could also examine how automation and digital transformation might reduce your costs. And, with growing online trading and the work-from-home trend, do you need your shopfront or as much office space? 

3. Manage your business debt

Xero argues that if the cost of the money you borrow is lower than the return generated by your business’s use of that money, it makes sense to borrow. But debt can be risky, especially in a rising interest rate environment, and for those with variable rate loans because they can fluctuate. 

It’s important to keep a beady eye on your debt levels and carefully monitor expenses. Assess whether you need to make any changes. Some loans and lenders are better suited to your needs than others. It also pays to shop around or to discuss your situation with your broker. 

4. Review your pricing

Rising inflation, interest rates and wages combined with supply chain issues, extreme weather events and geopolitical tensions can affect the pricing mix of your products and services. So, it’s vital to review your pricing strategy from time to time to ensure that you are still profitable and competitive. 

Many other factors can affect this strategy including how you have positioned yourself in the market, what your rivals are doing and the state of the market. You also must consider how your pricing will be affected by discounting and sales and how it changes between online and in-store sales. 

5. Create a budget

A budget helps you to plan and track expenses, prevent overspending and have enough money to pay for necessary expenses. It also enables you to prepare for future costs, such as payroll taxes and stock purchases. 

Most importantly, it enables you to plan for future growth. Without it, you might miss opportunities and face potential financial hiccups. It will show you how many sales you need to cover costs, how much money you can reinvest in the business and when you can afford to hire staff. 

There’s plenty of information online on how to budget and on the various types of software and apps to guide you through the process.  

6. Separate your finances

Experts recommend that you keep your personal and professional finances separate by using different credit cards and bank accounts for each.  

According to ANZ, separating your personal and business finances can save you time and help you feel in control of your business. It also makes it easier to apply for business loans and for your business financials to be interpreted, reported and filed. Plus, tax write-offs become more readily identified. 

7. Take advantage of tax deductions

It is crucial to be aware of the available tax deductions available to you and to take full advantage of them. This helps reduce the tax payable. According to Reckon, tax deductions that are often overlooked include: 

  • Union and registration fees. 
  • Bad debts (unpaid invoices beyond recovery). 
  • Self-education expenses (courses and books etc). 
  • Sun protection for those working outdoors. 
  • Work-related laundry. 
  • Donations.  
  • Bank fees. 

Talk to your accountant to find out what you can claim. 

8. Have a plan for growth

If you don’t have a map, you may never reach your destination and are likely to get lost along the way. It’s the same if you don’t have a business growth plan. Without a plan, it can be difficult to manage costs, allocate resources and gain an advantage over competitors. 

According to Workforce Australia, a business plan is a document that describes the important parts of your business and how you plan to run it. Putting together a business plan is a great way to get your thoughts about your business down on paper. It also helps you to set goals and can be a guide for turning an idea into a reality. 

Business plans usually follow a similar template. Most will include a quick overview of your business, your vision, a competitor analysis, a marketing plan, a finance plan and an action plan. 

Once the plan has been developed, it should be regularly checked to measure progress and ensure that goals are being met.  

The government has a business plan tool that can help guide you through the process.  

9. Keep good business credit

As your company grows, you may want to take out a loan or buy property or equipment. A good credit score will help you with this. It will determine how much external financing you can receive based on your financial history and will indicate your ability to pay it back. It will make it easier to get a loan or better terms from suppliers. 

To maintain a good business credit score you should build good credit relationships with suppliers and vendors, demonstrating that you can manage your financial responsibilities. You should also monitor your credit score regularly and correct any inaccuracies. If you have problems making payments, reach out to your creditors or suppliers to see if you negotiate a better solution. 

10. Don’t be afraid of loans

Loans can keep you up at night and cause you to be more cautious in your business dealings because of the fear of failure. But they have many advantages. They can provide access to capital for growth, whether it’s to expand your operations, open new locations or invest in technology and equipment. They also help you to smooth out fluctuations in your cash flow. Plus, the interest paid on them is often tax-deductible. 

Contact us for tailored funding solutions for your business.