When it comes to managing a small business cashflow is everything. It’s just as important as profit when it comes to determining your business’ performance. With the recent challenges faced by SMEs including rising overheads, supply chain issues, high staff turnover coupled with staff shortages and an increase to the minimum wage, it’s no wonder many are struggling with the day-to-day running costs. It’s vital they have a backup plan for their operations and a flexible financing solution. Here at business cashflow company OptiPay, we’ve seen a two-fold increase in enquiries as businesses come to us looking for a solution.
Often there are mistakes businesses make when it comes to cashflow issues. Here’s where they’re normally going wrong….
1. Delayed payments
It’s a simple fact of life that customers fail to pay on time. More than $76 billion of outstanding invoices are weighing on the shoulders of Australian SMEs. Delays in payments make it harder for you as a business owner to prepare for an accurate cashflow forecast. How can you plan an expense or ongoing payment when you don’t know when your next incoming payment is coming in? Cashflow forecasting is vitally important as it helps make the important decisions that keep the business going in the right direction.
2. Fast expansion
This is one of the most common causes of Australian SMEs’ cashflow complications, the temptation to move too quickly and grow too fast. Without enough cashflow, businesses lose the ability to control their working capital requirements. Growth and progression is vital for every business but make sure your cashflow is up to the task before you expand.
3. Poor inventory management
This is another common cause of cashflow problems, where excess stock is lying around leaving assets that tie up valuable cash for months on end. In addition to holding back cash that you could be using to fund your business, keeping too much stock means you run the danger of it becoming outdated and obsolete, which could land you in further trouble.
4. No sales leads
Poor cashflow can also be the result of low sales and a lack of new leads. It may be a seasonal demand issue or an overall slowdown of business but many organisations can hit a sales roadblock from time to time. Freshening your marketing campaigns can be one way of getting around this problem or renewing your focus on digital marketing and new salespeople.
If you find yourself experiencing cashflow problems the most important thing is that you address them quickly and it would be wise to engage the services of a financier to discuss the solutions available to you to provide your business with the extra cash it needs to keep up with its growth and working capital requirements.
