- “…60 per cent (of small business owners) report high to very high levels of stress… the unpredictability of income and cash flow problems is the top driver of business stress”.
- “More than half of Western Australia’s large companies are paying small businesses late for goods and services, causing significant financial stress…20 per cent of small businesses wait a month or more to receive payment”.
- “Only 54.3 per cent of small business who entered the market in 2013-14 survived to 2016”
2017 Bankwest Curtin Economics Centre’s Small Business Survey
(Source)
If you’re in small business, there is nothing more important than injecting & protecting cash. We focus on these areas of your business to maximize & protect cash flow!
Job Scoping, Tendering, & Control
Challenges:
- Job scoping, tendering and control practices are ineffective & result in cost overruns. A small/no profit is made on the job.
- The only things worse than waiting 30+ days for payment…is waiting 30+ days for payment on a job where you’ve made no profit.
How to Maximise Cash & Cash Flow:
- Set a minimum profit margin policy.
- Set up tendering processes/systems with accurate labour & material costs.
- Ensure a contingency factor is applied to allow for unforseen issues.
- Deliver only the agreed scope. Control job costs throughout execution. Catch potential cost overruns early & take action to protect profit margin.
Suppliers
Challenges:
- Materials are bought from a large group of suppliers. Opportunities to negotiate volume discounts & extended payment terms are missed.
How to Maximise Cash & Cash Flow:
- Consolidate material spend to a group of preferred suppliers. Offer suppliers higher purchase volumes to lock in the price discounts & extended payment terms.
Customers
Challenges:
- Long client payment terms are accepted without negotiation.
- Invoices are issued slowly post the completion of the job.
- Overdue invoices are not followed up/recovered effectively.
How to Maximise Cash & Cash Flow:
- Implement progress payment structures and/or early payment discounts with slow paying clients.
- Improve invoicing discipline – complete the job, issue the invoice.
- Implement an accounts receivable policy with an escalating model of debt recovery. Enforce it consistently, no exceptions.
Business Overheads
Challenges:
- Nonessential overhead expenditure.
- The internal overhead workforce is not fully utilized.
- External overhead services are not competitively tested.
How to Maximise Cash & Cash Flow:
- If it doesn’t generate revenue – do you really need to spend the $s? (ex. client gifts, food & beverage, memberships, training, personal use of company vehicles).
- Fully utilize the internal workforce before engaging suppliers to perform overhead services (ex. consolidate book keeping services to administration roles)
- Where external services are required, test the market to ensure the most competitive rates are being achieved.
Inventory & Assets
Challenges:
- No visibility of inventory held, no upper limits.
- Poor inventory purchasing practices.
How to Maximise Cash & Cash Flow:
- Set a maximum inventory held limit.
- Catalogue inventory. Return excess to suppliers & refund cash back into the business.
- Define material criticality & lead times. Order & hold the minimum amount of critical inventory.
Stressed about cash flow or know a business that is? We offer fixed price cash flow health checks. We diagnose problems & implement solutions to maximise cash & cash flow.
Send us a message!
About 3 Ps in Profit
Our Vision: Enabling all Australian small & medium businesses to succeed & thrive through genuine business coaching partnerships that deliver performance improvement & growth.
Our Mission: Improving & growing Australian small & medium businesses by focusing on the three fundamental elements that drive performance; planning & alignment, processes & systems, and people.
Want to know more?
We would welcome the opportunity to discuss your business goals and how we can help you achieve them.