Ask Us How: A Guide to Help Ride Out Rough Times

Posted by Michael Derin

Published on October 16, 2013 under NSW Business Chamber Partnership

SME owners are still looking at ways of minimising their exposure to any downturns or tough economic conditions.  Areas we suggest should be of particular focus are within their banking facilities, cash flow management, stock management and service agreements and have broken down these considerations for you in more detail as follows.


In today’s economic climate there isn’t a bank out there that doesn’t want assurance you are on top of things with your business and personal liabilities.  It is easy to avoid communicating with your bank manager, but in reality having an open and honest relationship can work to your advantage. 

You are better to bite the bullet and meet to discuss any potential issues rather than miss liability deadlines.  Unless you are actively managing this relationship and making your bank manager aware of your progress, they can be very quick to withdraw credit support.

Banks will be particularly interested in your cash flow forecast for the next 12-18 months.  It is also important to have accurate financials if your bank asks to see them.  If your bank reviews your finances and they are not properly reconciled and do not make sense, they will be very quick to pass judgment and withdraw support. 


The old adage “Cash is King” is particularly significant during these tough economic times.  It is critical for small businesses to maintain a firm control of their cash.

It is important to be in regular contact with your clients and customers and have proven and efficient invoicing procedures so that invoices are sent out as near to the beginning of the month as possible if done once per month, or as close to finalising a job as possible.  The sooner the invoice is sent, the sooner you can start chasing.

Businesses also vary in payment arrangements and terms agreed with their clients and customers.  If you are currently on a 30 day payment term arrangement with your suppliers it would be beneficial to change your payment terms with your clients and customers to 14 day terms, allowing you to collect money earlier and pay your bills later, increasing your cash flow.


Overstocking should be avoided.  Close watch should be placed on ensuring that correct procedures are in place over purchase ordering.  Now is not the time for surprise invoices to be received for non essential purchase items.  Once the goods arrive along with the invoice, it is often too late to do anything about it.

The same goes for sale agreements and/or fee determination agreements you have with your clients and customers.  It is imperative that you have a clear idea of what you are billing and have agreements in place that allow for flexibility should your role increase, as well as targeted fees for services that can be billed on completion of work.  Clients and customers are very quick to react to unsuspecting bills themselves so to avoid this complication it is important you are clear about how or when you will be charging for services.


If you are in need of any help in producing cash flow forecasts, ensuring your financials are in good order to present to the bank or advice on areas of your business where you could potentially cut costs, you should always speak to your accountant who would have the tools on hand to be able to support.


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