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Business IQ

Need A Boost? 5 Easy Ways To Improve Your Cash Flow

Effie Zahos
Smarter Writer

Effie Zahos is editor of <i>Money </i>magazine and has over 22 years' experience in the finance industry.

Effie Zahos
Smarter Writer

Effie Zahos is editor of <i>Money </i>magazine and has over 22 years' experience in the finance industry.

You could get money flowing into your account faster with these tips from Effie Zahos.

For many businesses, day-to-day operations are reliant on having a streamlined cash flow. Whether it's seven-day settlements or making sure your accounts are with the same institution, Effie Zahos has five tips to improve cash flow for your business.

cash

1. Get Cash 24/7 with Seven-Day Settlements

If most of your sales occur on the weekend, then seven-day settlement can go some way to solving this headache. By settling every day you’ll no longer need to wait until Monday to receive the weekend’s takings. 

“Not all banks offer same-day settlement every day of the week,” says ANZ’s general manager of small business banking, Nick Reade. “ANZ offers same-day settlement on all EFTPOS and credit card transactions, as well as payments taken via ANZ FastPay [an app that lets businesses process credit and debit card transaction through an iPhone or iPad].”

2. Go Mobile

Banking apps that turn mobile devices into merchant terminals are now available from a number of banks and service providers. These generally involve some additional hardware for the phone or tablet in the form of a card reader, and some software from an app or website.

The advantage of this is you can accept payment on the spot, rather than sending out an invoice or waiting for a cheque to clear. And as Canstar financial analyst Adam Beu points out, “If the clearing account is with the same institution as the merchant terminal, the money could clear that day.”

3. Streamline Your Accounts

Transferring money between financial institutions can take up to three days, and that’s dead time where you don’t have access to this money. By having a high-yield savings account with the same institution as your everyday business account, you can sweep money across instantly and it will start working for you faster.

Canstar’s Beu says that if you have a business loan, you should stash your cash in an offset account to help cut down on your interest charges. “An offset account is linked to a business mortgage account loan so it’s a good way to minimise interest. Just make sure it’s 100 per cent offset and look out for conditions which stipulate a minimum balance requirement before the offset kicks in,” he advises.

4. Set a Date and Make it Easy for Them to Pay

If you don’t detail credit terms on your invoices, then customers will make up their own. They’ll always pay suppliers who have put credit terms on their invoices before paying yours. Consider reducing your terms, for example, having 14-day rather than 30-day terms, then give your customers plenty of options on how they can pay. These days there are a number of electronic payment options. BPAY, for example, can credit funds to your nominated transaction account overnight.

5. Get Your Money to Work

The cash rate is at its lowest level since record-keeping began. That said, “the market for deposits is very competitive,” says ANZ’s Reade. “Term deposits offer customers certainty in a falling rate environment. A business online saver account is another great option for small business owners.”

According to financial research comparison site RateCity, the top three business online savers are coming from RaboDirect (4.7%pa), ING Direct (4.5%pa) and ANZ (4.25%pa). “All three are promotional rates, meaning they will generally only last for a few months and then they’ll convert to a base rate,” explains Michelle Hutchison of RateCity.

If you’re looking for a great ongoing base rate, then the top three business online savers are Delphi Bank (4%pa), RaboDirect (3.45%pa) and ING Direct (3%pa). Because business owners tend to move large amounts of money in and out of their accounts as they manage their cash flows, the rates on offer are not as high as personal online savers. 

But having said that, they’re an ideal place to put your BAS payments, as you earn a decent rate and have access to your funds 24/7.

Shop around, size doesn't matter:

It pays to shop around in order to secure a top rate on term deposits. Many small financial institutions offer very competitive deals and they are just as safe as the big players. All financial institutions that accept deposits must comply with the requirements of the Australian Prudential Regulation Authority (APRA), which are strict by world standards. In addition, the federal government guarantees the security of deposits up to $250,000 held with Australian-licensed banks, building societies, and credit unions.

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