Small businesses are the backbone of the Australian economy and face particular opportunities and challenges throughout their lifecycle. Starting and growing your business can be daunting. Here are ten top tips from Business Advisory Director Kim Reynolds.
1. Accurate record keeping
A well thought out business plan can help you define your goals, identify your target market, and competitors in the market. A business plan can also provide you with a path for growth and success.
2. Improve short term cash flow
Chase up as many outstanding customer payments as you can and consider changing payment terms so that your customers pay more quickly. Speak to your lender about temporary repayment extensions or deferments. Discuss with your accountant whether an invoice factoring arrangement would be suitable to your business’ circumstances.
3. Eradicate unnecessary expenses
Examine your overheads and identify what core functions and roles are absolutely essential to your business. Some expenses may not be able to (easily) be reduced or rearranged, e.g. landlord, equipment leases, etc. However where you can, reduce your expenses down to the essentials.
4. Consolidate debts and avoid new debt
Ensure you obtain a second opinion if you’re offered a way in which to consolidate your debts.
5. Prioritise debt repayments
Ensure debts against income-generating assets are paid first, e.g. equipment loans and/or leases. Debts with high interest should also be a main focus, as rapidly accumulating interest can be crippling to the future of any business.
6. Negotiate with creditors
Negotiating some breathing space with some creditors not only allows you some more time in which to make payment to those creditors in lieu of other more pressing costs, but also keeps the lines of communication open with your creditors. Communicating your situation can help avoid disgruntled creditors pursuing other avenues to recover debts, including calling on personal guarantees of the director.
7. Sell unwanted assets
Consider selling unused or underutilised assets to boost short term cash flows. In addition to raising much needed cash, it may also reduce ongoing storage costs. Consider leasing main assets as this can help spread the cost over a longer period.
8. Seek out Government grants
There may be an industry-specific or other grant available to you from the Government to help meet ongoing costs, either as a once-off payment or short-term proposition.
9. Get professional advice
Speak with your accountant or business advisor and make a plan. Seek out a registered Insolvency Practitioner for more specific and impartial advice on turnaround or wind-up options. Don’t delay asking for assistance – quick action provides more formal and informal turnaround options.
10. Avoid unqualified advice
Most importantly, steer clear of dodgy preinsolvency advisors. If the advice sounds too good to be true, it most definitely is. Most if not all, registered Insolvency Practitioners will offer some obligation-free consultations at no charge.