By now we have all heard the saying "cash is king". While many idioms can have ambiguous meanings, this truism is clear and transparent.
Cashflow is central to small business finance. If it is not flowing, it can make things difficult, but if it's well planned and gushing, a business is typically in good health.
One of the major reasons for this is that small businesses tend to not have the large cash reserves that bigger companies are able to call on when times become tight. And when it dries up, a small business does not always have the ability to access quick cash.
In the face of late payments, effective book keeping software can help.
As such, an Australian small business lobbyist has argued that the country is in need of a prompt payment code to ensure that small businesses are paid on time.
Calls for better measures
One of Australia's top SME associations has argued the Australian political elite should implement a voluntary prompt payment code to make sure small businesses are not hung out to dry.
Speaking to SmartCompany, CEO Peter Strong of The Council of Small Business of Australia (COSBOA) said a voluntary code of conduct that outlines and ossifies terms for prompt payments would be a step in the right direction.
"We want to change the culture [around prompt payments]. It will take time, but we want those who aren't a good payer to not necessarily get an automatic stamp of approval," he said.
Gary Gray, former federal small business minister, previously released a whitepaper on 'Prompt Payment Protocol', but the idea was never picked up by the government.
The problems with a dried up cashflow
If accounts receivable are not collected promptly, a number of problems can impact related stakeholders. For instance, wages cannot be paid to employees and rents can be left overdue, putting pressure on landlords. Additionally, many of the operational costs of a business are monthly subscriptions that require ongoing payments.
If COSBOA are successful, a voluntary prompt payment code would go a long way to ensuring that larger companies pay on time. However, in the mean time, there are a number of ways businesses can ensure that they are not left holding the wrong end of the stick.
Take for instance Jiwa Financials, a cloud based accounting and business software. It can help owners keep track of important peaks and troughs in their cashflow. Through this information, they can map and prepare for hard times and slow cashflow.
If you would like to know more, talk to the experts – contact a representative of Austlink today.
