Developing a cash flow strategy: vital for SMEs

In today's uncertain environment, a crucial necessity for SMEs is to establish a comprehensive ‘Cash Flow Strategy’. This strategy should cover budgets for all business activities and include key factors such as debtors, creditors, capital expenditure, inventory, work in progress, R&D, cash flow forecasts, and projected balance sheets.

“It is best that these documents are prepared and then monitored on a monthly basis with adjustments being made as required so that the business has current realistic forecasts at all times,” says Peter Towers, Managing Director of Towers Business Development.

Every business must implement a strong cash flow strategy that focuses on carefully managing debtors, investments in stock, work in progress, and capital expenditure.

Unfortunately, many businesses lack an effective Debtors Management System, which puts them at a significant disadvantage. According to Paul Robson, CEO of MYOB, some business operators mistakenly assume that debtors will pay within 30 days. In reality, Debtor Days Outstanding are substantially higher, with Australia even holding the unfortunate title of having the "Longest Debtor Days Outstanding in the World" a few years ago.

Robson also pointed out that new business operators often assume they will receive 30 days credit from suppliers. However, many suppliers now require payment upfront or upon delivery. Failure to anticipate these terms can create serious issues with cash flow management.

Towers Business Development can assist your business establish an effective cash flow management strategy. To find out more, contact 07 4724 1118 or email .