Understanding & Improving Cash Flow

• Cash Flow Planning

• Symptoms of Cash Flow Problems

• Cash Flow Solutions

   

  • Finance of Existing Assets

   

  • The Injection of External Capital

   

  • Informal Arrangements

   

  • Sale of Business

   

  • Voluntary Administration

Cash Flow Planning

Cash flow planning means ensuring that you have money available when required. The difference between the situation of having money and not having money to pay others may be attributable to things such as profitability or insolvency.

In order to properly manage your cash flow you must begin with a properly structured balance sheet, which is comprehensive and detailed. You must know and understand these numbers within the balance sheet, and it is advisable to complete a new balance sheet regularly.

If your business is struggling for cash, it is recommended that you do a weekly cash flow projection. If your business has a predictable cash flow you can budget on a quarterly basis.

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Symptoms that your business may need help:

• Being unable to pay creditors for more than 90 days.

• Creditors insisting on payment upon the delivery of goods (COD), or if the creditors refused to supply the goods at all.

• Banks regularly dishonouring business cheques.

• Using post-dated cheques regularly to pay their accounts.

• Increased working capital due to economic/competitive conditional changes.

• BAS statements are frequently lodged late with the Tax Office or if the BAS statements are often overdue.

• Not trading profitably.

• Not paying employees superannuation or employee superannuation being overdue.

• Holding too much excess stock.

• Having too many creditors.

• Having too many debtors.

• Being over financed.

• Being over invested.

If you are experiencing any of the above, Quinns are here to offer professional advice and help you devise strategies to help get your business on the right financial track.

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Cash Flow Solutions

If you are having short term cash flow problems it might be as a result of your clients paying too slowly, or it might mean that you have breached your credit terms with your suppliers. Quinn's can help you solve your short term or long term cash flow problems through various means and help turn your business around.

If you have long term cash flow problems it could mean that:

• Cash on delivery (COD) terms could start being imposed on you by some or all of your suppliers.

• You have no means to get short term funds in order to turn the business around, or to restructure it.

• You already have instalment plans and part payment plans with other creditors, or with the Tax Office, which may include GST and PAYG.

• Your lending is restricted by your banker.

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What is the Solution?

Some of the solutions we can offer you are:

1. Finance of Existing Assets

This option would mean financing or refinancing the existing assets of your company.

However other options include:

• Term debt finance or overdrafts.

• A discounting invoice or a factoring facility for debtors.

• Finance facility for stock.

• Equipment and plant finance facility.

2. The injection of External Capital

This option generally comes in two forms:

• Debt - which is loan to the company from shareholders, directors or other third parties.

• Equity - this is money which is raised by the company from both existing or new shareholders.

3. Informal Arrangements

An informal arrangement would be between the company's creditors and it can be either secured or unsecured.

4. Sale of Business

The sale of the business or part of the business is also an option. Another option would be to sell all or part of the business to a current director of the company or another party within the business. However, when selling or part selling a business to company directors or related parties, all parties must be careful to ensure that they fulfill all relevant fiduciary and statutory duties, and that those duties are not bought into conflict.

5. Voluntary Administration

It is important to understand that Voluntary Administration is a last resort, only once all the other options have been explored and proved unsuccessful should Voluntary Administration be considered.

When this option is exercised it is important that it is done right in order to minimise the chance of liquidation. The best way to be successful when appointing a voluntary administrator is to plan ahead.

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If you'd like more information or help to get your business out of short term (temporary) or more long term cash flow problems. Complete and submit the Express Enquiry form on the top right hand side of this page and we will contact you to discuss your enquiry or call us on 1300 QUINNS (1300 784 667) or on +61 2 9223 9166 to arrange an appointment.