Avoid business failure - get your cash flow under control

Where could your business be headed with poor cash flow?

Where could your business be headed with poor cash flow?

Do you need a better way to manage your business's cash flow? Perhaps you need advanced credit management or even some debt recovery. Either way, there is a lot your business could do with a bit more cash. However, for many SMEs and startups, the main goal with maintaining a steady flow of cash is to keep the business alive and kicking.

Avoid business failure

It's an unfortunate fact of business, but cash flow issues can be costly. In fact, according to the Australian Securities and Investments Commission, the number one cause of business failure in 2013-14 was inadequate cash flow or high cash use. This accounted for 43 per cent of reports from initial external administrators. The worst part is, this is not an unusual trend for Aussie businesses. According to ASIC's report, cash flow was the second biggest reason businesses failed in the previous two financial years, just behind poor strategic management of business.

For companies that are owed a lot of money, business debt recovery could be the most efficient way of getting your books back in the black. For those that are just starting out, creating terms of trade that manage customer relationships and expectations could help you avoid getting to this point.

It can't happen to me

Famous last words. No entrepreneur starts out on their journey ready to fail - although that's the risk they take. However, risk can be mitigated through smart financial planning and efficient credit control. 

If you're still certain that your business plan is bullet-proof, remember that 49 per cent of SMEs fail in their first five years - according to global statistics compiled by Simply Cashflow​. What's even more enlightening is that 61 per cent of these businesses cited cash flow issues as their downfall.

This can be a scary statistic, especially considering that Treasurer Joe Hockey reports that 96 per cent of Australia's firms are small businesses. These SMEs employ 4.5 million people and account for $330 billion in GDP.

It's not only in the interest of you and your business to ensure your cash flow is up to scratch - it's in the best interests of your employees, local community and the economy as a whole.

if you'd like to find out more about how you can protect your SME and keep payments coming in, talk to Commercial Credit Services about the range of credit management and debt collection options available.

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