As costs balloon and consumers slash spending, preserving cash flow will be mission-critical this financial year. Without addressing seven key areas, doing that will be virtually impossible, warns Helen Baker, financial advisor and author of On Your Own Two Feet: The Essential Guide to Financial Independence For All Women.

Cash flow is the lifeblood of any business. Without it, there is no business. And with a deteriorating economic outlook, the challenges in maintaining it are mounting.

7 tips to keep cash flow strong in FY24

Review your cash flow situation by analysing the overall business and its various incomings, outgoings and ongoings.

1. Realise revenues

With the threat of recession looming large, protecting revenues will be key this year.

Can you keep sales up? Do you need to increase prices? Can you bundle products/services to upsell while delivering customers better value?

Analyse clients – who pays you on time? Who do you need to chase? How can you encourage stragglers to pay faster (e.g. add a pay now button on invoices; discounts for pre-payment)?

Consider net overall cash flow – business and personal – to optimise tax deductibility and expenses.

2. Staffing safeguards

Your employees are your front line. Are you doing enough to keep them? How could you better leverage their individual skills and collective knowledge to boost growth and efficiencies?

Factor in unexpected losses. What contingencies would you need if Mary/Mark suddenly died or left? Are they the only ones with access to accounts/services/clients? Do you have key person insurance?

Recovery costs – and hence the hit to your cash flow – will be far less if you’re prepared.

3. Scrutinise serviceability

“That frustrating client takes up 80 per cent of my time but only delivers 20 per cent of my profit.” Sound familiar?

It begs the question: How much more profit could be generated if that time was used more productively?

Apply an activity-based costing analysis to determine which clients and services are actually profitable and which ones aren’t. Armed with this data, it may be time to rethink your approach to boost profitability or make necessary cuts – sometimes, less really is more.

4. Evaluate expenses

Cost reviews should be done regularly anyway, but in times of high inflation, preventing cost blowouts is critical. Don’t put it off.

Separate expenses by importance and ROI:

• Keep – essential for doing business. There may be little room to move on pricing.
• Trim – either cut actual spend or get more value for the same money.
• Scrap – do you really need it? Be honest.

Then jump into action to cancel unnecessary spending, switch to cheaper alternatives, and derive better value for money.

Consider too, how each expense is paid. Using loyalty/credit card points can preserve cash. Others could be discounted by pre-paying or on subscription.

5. Review the cost of capital

Amid rising interest rates, review all loans and see whether rates can be reduced. Many lenders also currently have additional incentives like cashback offers to switch.

If your incumbent won’t beat or at least match these, say goodbye.

There may be the scope to refinance multiple loans into one, consolidating payments and reducing overall interest.

6. Rightsized taxes

Improve cash flow by rightsizing your tax and avoid inadvertent overpayments:

• Keep good records. You can’t claim what you can’t see (and prove).
• Photograph and record receipts as they come in, to avoid them being lost or damaged.
• Claim all expenses, including accounting, legal, business and financial advice, work-from-home expenses, self-education costs.
• Keep a logbook for work-related vehicle travel – every kilometre adds up.
• Claim depreciation in full – up-front deductions using the instant asset write-off where possible. For the rest, don’t forget subsequent years’ worth of depreciation.
• Embrace super benefits. Personal tax can be offset by making super contributions to yourself or your spouse. Low-income earners may be eligible for government co-contributions.

7. Explore grants

Grants and awards allow you to use others’ resources to grow your business, freeing up your cash.

All levels of government offer various incentives, including cash grants, subsidies and free mentoring/consulting. Some target particular industries or offer relief for businesses affected by natural disasters or the pandemic. Tax offsets and incentives are available for expenses associated with innovation, exporting and more.

WATCH KBB TV: Top tips for securing government grants

Many corporates have small business grants and awards, providing valuable cash and resource injections. Industry bodies offer grants and subsidised/free development programs.

Above the monetary value, your business may also benefit from associated free publicity – win-win!

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