Australian cashflow funding company OptiPay has revealed the large number of Australian SMEs facing challenges keeping their cashflow positive.
“We’re seeing a huge increase in businesses struggling with their cashflow at the moment due to high interest rates, the rising cost of living and post-COVID tax debts,” said OptiPay CEO Angus Sedgwick. “Late payments are another cashflow hurdle with some SMEs waiting up to 60 days to be paid for invoices.”
“Cashflow is critical in navigating these challenges as it not only fuels daily operations but supports strategic growth too,” Sedgwick added. “We’re finding for many industries like manufacturing, labour hire services and transport and logistics, those that have strong cashflow systems in place, are able to ensure year-round financial stability.”
To address cashflow challenges of SMEs, OptiPay offered some key tips:
1. Forecast cashflow
OptiPay shared that accurate forecasting and realistic budgeting are vital for effective cashflow management. “Business owners should be regularly reviewing their financials, uncovering patterns and using those to plan for the year ahead. Anticipating cash shortfalls it allows businesses to make informed decisions about spending and investments,” Sedgwick said.
2. Control expenses
Business owners are encouraged to do a stocktake of their expenses and consider ways to reduce expenses during times of low cashflow such as negotiating better terms with suppliers to reduce costs and bulk purchasing discounts and offering additional products or services to reduce reliance on a single source of revenue. “Reviewing spending helps identify unnecessary expenses and also provides a chance to look at opportunities to diversify revenue streams,” said Sedgwick.
3. Conduct inventory management
OptiPay shared that inventory management can significantly hinder or enhance cashflow management for product-based companies. The funding company added that business owners must set in place a proven inventory management system specific to their business needs, which can help them maintain optimal stock levels, reduce carrying costs, and free up cash.
4. Consider financing
To bridge gaps in liquidity, businesses need to consider alternate sources of funding. This could include traditional loans, credit, or invoice financing, which allows business owners to borrow against the value of outstanding invoices. Small businesses should also seek out government grants and support programs for financial relief and support during tough times.
5. Update technology
Businesses are reminded to stay up to date when it comes to the latest technology for managing their finances. Take advantage of advanced accounting software and cashflow forecasting tools, as they often provide small-business owners with real-time insights into their financial health.
