The stuff of nightmares for beginner property investors: tenants not paying on time, never enough savings in the bank, unexpected tax bills… when does it end!? To help you rest easier, read this short guide to property cash flow management.
“Cash Is King”
We’ve all heard the many sayings about the importance of cash flow, all of which are of course true. So, why do so many beginner property investors struggle with cashflow even while owning a positively geared property? Quite simply, you aren’t managing it properly in order to control it.
Of course, as any experienced property investor will tell you, being paid on time is the true reason for most beginner investor’s cash flow issues. Negative cash flow will stifle any property investor. Though we can’t make your tenants pay on time, one great way to stay on top of your payments is to use technology to help you track your finances and help you get paid faster.
Consider signing up to an accounting program – we recommend Xero – in order to track tenant payments, expenses and other finances. This will help you stay on track with payments and keep you aware of any late payments in order to follow up quickly and get paid on time. (Xero even sends auto reminders for you if payments are late!)
You can also consider signing up for popular payment options, such as: PayPal, BPAY and Mobile Payments. This may help make payments easier for some and have it get to you quicker.
5 Strategies for Strengthening Your Cashflow Performance
- Immediately Follow Up Overdue Payments – If an invoice payment or rental payment is overdue, follow up as quickly as possible. There is no such thing as ‘too soon’ if a payment is overdue, call and find out why and demand payment.
- Track Expenses – All of your properties expenses need to be tracked. From maintenance costs to rates bills and everything in-between, if you are spending money on your property you need to track it!
- Keep on Top of Late Payers – If you have a tenant that regularly pays late, send them reminders leading up to the payment due date. Don’t trust them to pay, manage your finances to ensure that they pay on time.
- Speak to Your Accountant – If you are doing the right things, but are still having cash flow issues, speak with your accountant. They may be able to recommend ways to save or areas in which you can better your finances in order to achieve more cash flow.
- Employ an Expert – If you have invested in multiple properties or if managing your property investment is taking too much of your time, employ a professional. An expert property manager will ensure tenants pay on time and that your property is regularly maintained. So, you can rest easy and keep a closer eye on your increasing cash flow.
Finally, don’t immediately spend what you save! And, if you’re still struggling, sign up for Cashflow Momentum. They’ll get you on track.