Tag Archives: business insurance

Cash flow makes or breaks your business, so safeguard it!

According to a recent survey by research firm East & Partners for lender Scottish Pacific, nearly 80% of owners of small and medium enterprises said cash flow issues caused them the most sleepless nights.[1]

Which then begs the question, what might you do to improve your cash flow and sleep better at night?  Here are five tips you can take that can help!

1.   Build a cash reserve

We’ve often heard “Cash is King” but the truth is, it’s really Cash Flow!  Cash flow is the true lifeblood of any business. To ensure that it makes, not breaks, your business, it’s important to build a robust cash reserve. This may help you meet your financial obligations in difficult times and allow you to take on opportunities to grow your business.  Sometimes, that’s easier said than done, but worth working towards.

2.   Separate business & personal money

Keep business and personal expenses separate!  It makes it so much easier to understand your business’s cash position at any given point. It also ensures that you don’t use money meant for your business on personal expenses; like that holiday or your mortgage.

3.   Get paid on time

If your business hasn’t been actively pursuing unpaid invoices, you may want to make it a practice – and have a strategy – to regularly chase up payment. Finding ways to encourage prompt payment, such as offering a discount to early payers, can help.

And if that’s something that you find cringe-worthy – outsource it.  Ask your book keeper if they’ll make those calls you hate for you each week to stay on top of things.

4.   Control business costs

Controlling costs might help you to maintain a healthy cash flow. Experts suggest taking stock of your business expenses regularly to identify where you can cut costs without sacrificing growth. This may include reviewing your suppliers and negotiating better rates with them.  Review whether they’re items that you can’t avoid (like taxes) to items that you probably should do (like marketing) to the ones that you can go without (like sponsorship.)  Even if it’s just until things turn around.

5.   Protect your business

By taking out business expenses insurance and/or key person insurance, you may help ensure your business can meet its running costs if you or a key employee is too ill or injured to work. Both insurance plans provide a monthly benefit if you or a key person in your business become incapacitated.  Absolutely vital if there’s key people you just can’t do without!

Work with a professional

Your professional financial adviser tailors insurance plans to your business’s cash flow protection needs, safeguarding what you’ve worked so hard to build.  Is it time you had another look at your strategy?

Note

[1] Scottish Pacific and East & Partners, October 2018, ‘SMEs flag higher revenue growth, but prospects could be dampened by declining property market and cash flow issues,’ accessible at: https://www.scottishpacific.com/media-releases/smes-flag-higher-revenue-growth-but-prospects-could-be-dampened-by-declining-property-market-and-cash-flow-issues

Running a Small Business? Make sure you are properly insured

Running a small business is hard work. The last thing you need is to lose it all because of poor insurance choices.

Do your homework

First you need to work out what needs to be covered. There are the obvious things such as plant and equipment, the less obvious things such as public liability, professional indemnity, and finally protecting the financial performance and position of the business on the sudden loss of a key person.

Policies should cover a wide range of eventualities and each business should have a policy package specifically geared to its needs.

People are the most important assets, and the success of the business may hinge on key personnel.

Business expense insurance can cover certain fixed business expenses, and key-person insurance can protect the financial performance in the event of a key person or business owner dies, is permanently disabled or suffers a traumatic event.

Insufficient coverage

Owners risk losing control of their companies, serious financial losses, and complex partnership problems by being uninsured, or underinsuring against something going wrong.

Having the wrong kind of insurance is equally risky and ultimately a waste of money, which is why it’s necessary to seek advice on the right insurance for your business.

It’s also important to regularly review and update your insurance, especially when your business grows or changes.

There is always tax

You do not have to pay capital gains tax (GST) on a business insurance settlement, provided you tell the insurer before making the claim what proportion of the premium you can claim GST credits for, which will be the part that relates to business purposes.

But remember, your accountant should assess all taxation matters.

Working together with your financial adviser to determine what insurances can be put in place is an important consideration when running a business.

The Insurance Council of Australia, http://www.understandinsurance.com.au, and the Australian Taxation Office, www.ato.gov.au, have more information.