The mining industry is highly competitive and often characterised by enormous projects with huge budgets. When payments are stalled, business owners need to make a serious plan when it comes to managing cash flow in the New Year.
Take responsibility for what you can control.
It’s easy to blame your customers for lengthy payment periods, but you know what to expect when you signed the contract. Accept that your business may not be getting cash for some time and plan accordingly. There are plenty of options out there to get you through the slow times.
Create a cash flow forecast.
Forecasting your business cash flow helps manage uncertainty by predicting peaks and troughs in your cash balance, as well as identifying trends for the months and years ahead. First, draw up a list of all the payments you need to make over the next year — this may include stock and equipment, wages, rent, loan repayments and taxes. Then list what money will be coming into the business. Compare the two to see how much money your businesses will have on hand in the New Year. There are numerous forecasting templates on the Internet to help get you started.
Having this information on hand means you can manage your big costs, such as staff hires or bank loans, and arrange your spending schedule accordingly.
Use invoice financing.
Invoice financing is where a third party agrees to buy your unpaid invoices and advance you the cash. The invoice financier then collects the full amount, directly from the customer when the invoice is paid. This can be an excellent solution to keep your company afloat between payments.
Have a backup plan.
Sometimes things don’t go quite right, and if you don’t have enough cash flowing in, you’ll have a big problem on your hands. A 2015 paper published by the ABS showed that, of all the mining businesses operating since June 2011, only 66% survived, and the smaller businesses had the worst survival rates of all. If your company is going to be one of the survivors, you need to plan ahead — look for ways to supplement your cash flow quickly, and decide which ones could be right for you. You’ll thank yourself later.
Get expert advice.
If you’re feeling a little unsure, talking to an expert can improve your financial skills and give you valuable peace of mind. Seek advice from a professional accountant or financial advisor who can assess your individual situation — they could be the extra step that keeps your business alive next time a customer pays late.
Cash flow is often called the lifeblood of a business, and for good reason: no business can survive long without enough cash to meet its needs. If you know your business does not have a steady cash flow, don’t let yourself get caught out. Steady your cash flow and set your business up for success in 2017. Contact tim to find out more.