Posted July 14, 2020
This blog post is general information only and should not be considered to be financial advice. HABA recommend that all salon owners seek independent financial advice on their business.
Cashflow is one of the biggest stressors for small business owners across Australia. From long payment terms from larger organisations, to dealing with tax and debts, getting on top of your cashflow (and subsequently the rest of your finances) is one of the easiest ways we know of to reduce stress in your business. We’ve compiled the steps you need to take to get your money matters back on track:
Check on your finances
The first step in any process is to get on top of where you are at to determine where you need to go. Check out how your business is performing against others in your industry using the My Business Health calculator, check on where your margin is sitting, what your gross and net profit are and what your incomings and outgoing expenses are each month. Make sure you have a list of your current debts and your current owing’s to ensure that you get a wholistic picture of your finances in one hit. Use as many of the free resources available as possible to ensure that you are looking at the complete picture.
Accounting and budgeting
Having a good accounting system in place really can help you organise and keep ontop of your business activities. Having a bookkeeper or accountant who has intimate knowledge of the goings-on in your business also helps and working with a business adviser can help solve business problems, connect you to funding and ensure that you are getting the maximum benefit from any government incentives.
First, create a budget for your business to help you plan where you need to direct your money and where it is most needed. Consider your fixed and variable costs (which you know from your finances check) and account for them. Look at the time frame your working on – at the moment, in this state of turmoil in the world, plan for the next few months and be prepared to check back in with your plan regularly to ensure that it’s still relevant as the times continue to change.
A cashflow statement can help you understand where your money is coming from and where it is going – planning ahead, particularly with money, is a great way to minimise stress and avoid problems down the track. Continue to monitor your budget and check that you’re spending what you can afford, rather than what you need to borrow. Log all your business income and expenses during the period, and ensure that it lines up with what you thought income would be and what expenses are coming in. Where there is a difference in those amounts, find out why and course correct.
Once your business budget it planned out, consider implementing a monthly forecast. A forecast predicts your future cashflow based on your past income earnings. It can help you keep on top of your bills and help you get finance for loans if you need them.
Debt and taxes
We have just passed the end of financial year, which means tax is on everyone’s mind. Make sure that you’re on top of which taxes apply to your business, what relief options are available to you and what assistance you can receive. If you find yourself in a dispute with the ATO, you can speak to the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) or your financial adviser. They can negotiate with the ATO and help you with the appeals process and find an appropriate pathway to resolution of those dispute points.
If your business is struggling with debt, the best time to start dealing with it is now. Allow for debt payments within your budget and ensure that these are met and kept every month. If you’re struggling with financial issues, the National Debt Helpline can direct you to a financial counsellor who can provide you with tailored advice in the instance you’re unable to speak to a financial adviser. Prioritise your debts and identify what you can afford to pay not, what you can pay later and what can go onto a payment plan. Speak to your creditors as soon as you can about the struggle you are having – in the current climate, many lenders are offering loan extensions and the government are offering assistance with business loans. Speaking to your adviser or the National Debt Helpline will help you identify what solution will work best for you.
Getting more money in.
This really is the clincher – we can do all sorts in our business to manage our money, but if the money isn’t coming in, or you’re not getting paid, then there’s a limit to how much you can manage the other factors.
If you’re having trouble getting paid for the work you have done, or disputes with your suppliers, a polite and professional conversation can be a good first step to help clear up any misunderstandings. Sometimes emails hit junk boxes, or things get missed. Start with a conversation, and if it becomes more problematic than that, it might be necessary to escalate the situation. You can get help with dispute resolution on income through the ASBFEO by calling them on 1300 650 460.
During these tough times, your business may be eligible for a range of government assistance programs, at both a state and federal level. By speaking with your financial adviser, you can be sure that you’re getting the maximum benefit for your business.
You can apply for a business loan if you need to, and having your business checklist, accounting and budgeting handing will help you in securing that loan. A business plan will also most likely be necessary. As part of your business planning, make sure you understand your limits for financing in any part of your business, and your ability to repay any money you borrow, relative to your business cashflow and budget. There may be an option for you to borrow against the equity in your business, rather than establishing an overdraft or line of credit. Speak to a financial adviser or accountant about the best way to structure your loan to ensure that you can manage that debt as you take it on.
Money matters are a constant source of stress and worry in business, and that’s hard to avoid. By getting on top of your current finances, setting a budget, getting a plan in place for debt and working on bringing more money into your business, you can mitigate the risk and stress associated with business during a crisis. The best time to start working on your money matters was yesterday – and the next best time is today. So, don’t wait or leave it to long, start managing your money better NOW.
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