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How does your business model affect growth?

Most business owners understand that growth requires the business to be in a healthy financial position. Businesses need working capital to grow, and cash is a vital catalyst for this process which is why it’s vital to understand the cash flow model and how it applies to your business.

As a leading provider of business planning services in Melbourne, SP Solutions are on hand to offer advice to help small businesses grow. The first step in our process is making sure business owners understand the cash flow model. We work with your business to draw up a three-way cash flow forecast to outline how cash, profit and sales interact and how much overdraft you may need, this forms the basis for further analysis undertaken during financial modelling.

Consider how your industry affects your cash flow

Think about the nature of your industry, what are the transactions taking place and how regularly do they occur? Does stock generally move quickly? We recently worked with a wholesale business on their business growth strategy. The nature of the wholesale industry meant long cycles. Orders of goods from overseas can take up to three months to arrive with full payments often being required at the time of the order. These goods may also take months to sell meaning the client was funding 6 months of working capital.

Our financial analysis and three-way cash flow revealed that this wholesale business required an overdraft of up to $500,000, double the $250,000 overdraft they had already secured. As the client was ineligible for help from a bank, they sought our business advisor accountant services further to devise a strategy for growth. After further analysis of their business model, we advised the client to negotiate with suppliers to change how money was collected and place some customers on a Cash on Delivery plan so as to receive payments more efficiently.

Implementing these new measures improved the financial position of the business and moved them increasingly away from their overdraft limit. During this time sales also doubled creating a positive cash flow for the business. After 12 months the client had doubled their business!

Focus on a long-term cash flow strategy

Grasping an understanding of your business will allow you to work out any problems with your cash flow which may be stemming business growth. Where some business advisor accountant services may suggest taking out a loan as a quick fix, we understand how this can negatively affect businesses down the line. SP Solutions devise long-term cash flow strategies to improve the profitability of your business and stimulate growth.

Looking for business planning services in Melbourne? Get in touch with SP Solutions to arrange a consultation to devise a strategy for business growth.

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