Even if you're not a news junkie, it's wise if you're a small business owner to pay attention to current events and think about how they might affect the success or failure of your organisation. For example, if there's a tax cut or an interest rate hike that's making major headlines, is there any chance of the impact trickling down to you? If your customers have more or less money to spend than they did before, your bottom line may well see the effects of that.
If you're aware of what's going on in financial news, you can plan ahead for your company's future.
If you're aware of what's going on in financial news, you can use that knowledge to predict future trends and plan ahead for your company's future. If, for example, you see a financial crisis coming six months from now and you know your cashflow will take a hit, you can begin saving for when that day comes. A little awareness can take you a long way.
The dairy crisis ripples across Australia
For an example of how current events can affect a company's cashflow, consider the impact of the dairy crisis in Australia. Last year, the market for dairy products crashed, and milk suppliers were suddenly unable to bring in the same revenues they used to.
According to ABC News, the impact of this news spread to other companies tangentially related to the dairy industry. Adrian Hayward is owner of Advanced Dairy Systems, meaning he installs dairy farming equipment for a living. He was suddenly without a massive amount of working capital because so many of his employees were unable to pay their debts.
"Between the two of these companies, ourselves and a vet, we worked it out [and we're owed] about $1.3 million of unsecured debt," Mr Hayward said. "When some of our customers have a debt with us and we have to run out there, we think, 'When can we get paid?'"
The answer: Not anytime soon. Not only that, but Mr Hayward is also having trouble attracting new business because no one can afford to open a new farm or bolster their existing one. The businessman told ABC that he hasn't installed a new dairy in more than a year.
What's your process for collecting debts?
If you're in a position where the circumstances around you are making it hard to collect debts, you might have to reconsider your approach. Dynamic Business recommends that in times of need, you take a long look at your policies and procedures for handling unpaid invoices.
For example, what's your timetable for collecting debts? Some companies demand payments from their customers within 30 days, begin to pester them for the money after 45 and threaten legal action to collect after 90. Your specific rules might depend on the industry you're in and the relationships you have with your customers. But what if they aren't working?
If that's the case, you may need a more aggressive strategy for collecting what you're owed. The trick, though, is balancing the need for that aggression with the desire to keep your customer relationships strong.
Need to get some help with cashflow?
Say you come to a crossroads where getting tough with customers isn't working anymore. Either they're not responding, or you're afraid to press them because you don't want to alienate them. What do you do then?
The best answer is to try alternative sources of funding for your business. For example, at Earlypay, we can help you out by giving you access to solutions like debtor finance. This way, you can collect money quickly without needing to worry about cash being tied up in your debtors' books. Contact us today if you'd like to learn more.