3 areas to help with Cashflow


Cashflow is one of the prime causes of angst among those who own or run a business.  Whether you have a start-up business or are already established, there may be times when you will experience a cashflow crunch.

One of our Senior Bookkeepers has provided her top 3 areas to focus on that can help with improving cashflow.

1.Sales invoices

Send invoices out promptly. For invoices due on the 20th that are unpaid, an Outstanding Invoices statement can be sent as a reminder. You can prefix the subject line with “Reminder / or Overdue” (as appropriate). If the payment has not arrived by say the 25th, send an email. Make sure the subject line has ‘Overdue invoice/s’ and request an expected payment date. This request creates ‘Upflow’ within an organisation, and the Customer or Accounts Team will need to reply with an expected payment date. If, by the 28th funds are still not received, a phone call should be made to request an expected payment date. Customer Statements should be sent as soon as possible past month-end. For some businesses, it may be a new thing to start chasing customers for payments. Red Office can help with this. Feel free to send us a message to enquire.

2.Purchases (bills)

There is a function in Xero to set planned payment dates separately to the bill due date. These planned payment dates give a snapshot view of what is owing and when. For main suppliers, negotiate extended payment terms. Most are willing to do so. Here’s an example of how this looks:

Step by step, the cashflow becomes clear – as to whether it is positive or negative, and by leaning on Customers to pay on time, and by talking to Suppliers to ask for extended payment terms, will optimize the situation.

By clicking onto one of the planned payment dates, it drills down and provides a list of bills to be paid and to whom. A business owner can change the planned payment dates easily to re-jig the cashflow etc.

3.The obligatory taxes: PAYE, GST, Income Tax.

The IRD has an installment arrangement available inside its portal, that is very easy to use.  For PAYE, GST, and Income Tax – there are penalties applied if these get missed, causing unnecessary angst and expenditure if not managed.

By spreading the cost over 12-18 months, a business can firstly avoid any penalties, though they must pay interest, all of which is set out in the installment plan at the time of application. IRD provides a response on the spot – Successful or Declined so there is no waiting.

If you can spend a few hours on your cashflow review and plan, it will set you up for Christmas and hopefully on the other side sales will increase again. We recommend you don’t leave your cashflow calculations until it’s too late. Do it now! If you need assistance with this please let us know. We are happy to help but must clarify that we cannot provide business advice as the business owner must make their own decisions based on the information provided.

If you would like to speak to one of our team further on this, please get in touch with your main bookkeeper or accounts manager to make a time to discuss.

Find out more about how a Red Office bookkeeper can help your business grow.

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