Manage Your Cash Flow or Die

Managing a small business anywhere in the world is a challenge. Managing a small business in Jamaica is even more so; you have to be an accounting ninja to keep your cash flow positive as it is almost second nature for Jamaicans to delay payment as long as possible. Heavy taxation does nothing to ease these inherent problems and, as such, to keep your business afloat, you have to be savvy and flexible to survive.

Here are five tricks of the trade you can add to your arsenal to help you survive as a small business owner in Jamaica.

1. Use JMMB for banking

Your JMMB account can function as a checking account without incurring the fees associated with a regular checking account by a commercial bank. They charge a service charge plus GCT for each cheque requested, but this can easily be avoided by requesting your cheques online.

2. Maintain the cash equivalent of one to two months of expenses in your account

Most clients make their payments to vendors at the end of the month. This cheque, most likely, will be held by your bank (including JMMB) for 5 to 7 working days. Now considering that your bills as well as GCT are due at the end of the month, you might not have the luxury of waiting a week to access the cash you have collected. Holding the cheque against your float allows you access to your cash immediately so you can meet your obligations on time.

3. Run a home/virtual office

Run your business from your home if this is at all possible. This not only keeps your overhead to a minimum but can also assist you in meeting your personal mortgage/rental payments. It may be attractive and seem more professional to rent an office, but many small businesses do not survive long enough to grow into the space too hastily rented. Operate from your house if possible and grow out of it. If you need to meet with clients, meet either at their office or over lunch. Yes, you might have to spring for the check…but remember that this too is tax deductible.

4. Do not post invoices to your accounting system until they are paid

Once you post an invoice to your accounts you will have to pay the GCT on that invoice whether or not the client has paid. You can claim back for it on your next GCT payment, but paying out money you have not yet received is always bad and should be avoided at all costs.

5. Avoid under the table transactions

In a shrinking economy where you face heavy taxation, this may seem attractive, since it puts money directly into your pocket and saves you from paying taxes on these transactions. However, this practice actually strangles the inflow of cash into your business. So while your personal coffers are being fattened, you might find that your business is struggling to meet its financial obligations and stay afloat. Remember not everything that is good for your personal financial state is good for your business. Do not CANNIBALIZE your source of income.

If you have any tips you would like to add to this arsenal please add them in the comments section below.

GOOD LUCK!